AMAG Pharmaceuticals, Inc.
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549____________________ ______FORM 10-K(Mark One) xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2018or¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from toCommission file number 001-10865AMAG PHARMACEUTICALS, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware(State or Other Jurisdiction ofIncorporation or Organization)04-2742593(I.R.S. EmployerIdentification No.)1100 Winter StreetWaltham, Massachusetts(Address of Principal Executive Offices)02451(Zip Code)(617) 498-3300(Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.01 per sharePreferred Share Purchase Rights NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T duringthe preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer xAccelerated filer ¨Non-accelerated filer ¨Smaller reporting company ¨Emerging growth company¨If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x The aggregate market value of the registrant’s voting stock held by non-affiliates as of June 29, 2018 was approximately $664.2 million based on the closing price of $19.50 ofthe Common Stock of the registrant as reported on the NASDAQ Global Select Market on such date. As of February 25, 2019, there were 34,713,130 shares of the registrant’sCommon Stock, par value $0.01 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement to be filed in connection with the solicitation of proxies for the Annual Meeting of Stockholders are incorporated by reference into Part III ofthis Annual Report on Form 10-K.AMAG PHARMACEUTICALS, INC.FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2018TABLE OF CONTENTS PART I Item 1.Business2Item 1A.Risk Factors34Item 1B.Unresolved Staff Comments61Item 2.Properties61Item 3.Legal Proceedings62Item 4.Mine Safety Disclosures62 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities63Item 6.Selected Financial Data65Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations68Item 7A.Quantitative and Qualitative Disclosures About Market Risk93Item 8.Financial Statements and Supplementary Data94Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure147Item 9A.Controls and Procedures147Item 9B.Other Information148 PART III Item 10.Directors, Executive Officers and Corporate Governance149Item 11.Executive Compensation149Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters149Item 13.Certain Relationships and Related Transactions, and Director Independence149Item 14.Principal Accountant Fees and Services149 PART IV Item 15.Exhibits and Financial Statement Schedules150Item 16.Form 10-K Summary150 Exhibit Index151 Signatures155Table of ContentsPART IExcept for the historical information contained herein, the matters discussed in this Annual Report on Form 10-K may be deemed to be forward-lookingstatements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995 and other federal securities laws. In this Annual Report on Form 10-K terminology such as “may,” “will,” “could,” “should,”“would,” “expect,” “anticipate,” “continue,” “believe,” “plan,” “estimate,” “intend” or other similar words and expressions (as well as other words orexpressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.Examples of forward-looking statements contained in this report include, without limitation, statements regarding the following:•our plans regarding the growth potential of our portfolio and our ability to identify additional product candidates;•beliefs regarding the expenses, challenges and timing of our preclinical studies and clinical trials, including expectations regarding the clinicaltrial results for ciraparantag;•beliefs regarding our commercial strategies, including the impact of our efforts to convert current Makena IM prescribers to the Makena auto-injector and the timing of the commercial launch of Vyleesi;•our estimates and beliefs regarding the market opportunities for each of our products and product candidates;•beliefs about and expectations for our commercialization, marketing and manufacturing of our products and product candidates (which may beconducted by third parties), if approved, including plans to raise awareness and education of dyspareunia, VVA and HSDD and the results of suchefforts;•the timing and amounts of milestone and royalty payments;•expectations and plans as to recent and upcoming regulatory and commercial developments and activities, including requirements and initiativesfor clinical trials and post-approval commitments for our products and product candidates, and their impact on our business and competition;•expectations for our intellectual property rights covering our product candidates and technology and the impact of generics and other competitioncould have on each of our products and our business generally, including the timing and number of generic entrants;•developments relating to our competitors and our industry, including the impact of government regulation;•expectations regarding third-party reimbursement and the behaviors of payers, healthcare providers, patients and other industry participants,including with respect to product price increases and volume-based and other rebates and incentives;•plans regarding our sales and marketing initiatives, including our contracting, pricing and discounting strategies and efforts to increase patientcompliance and access;•expectations regarding the contribution of revenues from our products to the funding of our on-going operations and costs to be incurred inconnection with revenue sources to fund our future operations;•expectations regarding customer returns and other revenue-related reserves and accruals;•expectations as to the manufacture of drug substances, drug and biological products and key materials for our products and product candidates;•the expected impact of recent tax reform legislation and estimates regarding our effective tax rate and our ability to realize our net operating losscarryforwards and other tax attributes;•the impact of accounting pronouncements;•expectations regarding our financial performance and our ability to implement our strategic plans for our business;•estimates and beliefs related to our 2022 Convertible Notes and the manner in which we intend or are required to settle the 2022 ConvertibleNotes;•estimates, beliefs and judgments related to the valuation of certain intangible assets, goodwill, contingent consideration, debt and other assets andliabilities, including our impairment analysis and our methodology and assumptions regarding fair value measurements; and•beliefs regarding the impact of our recent restructuring initiative, including the impact of the combination of our women’s and maternal healthsales forces and the related reduction in head count.Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated or indicated in any forward-looking statements. Any forward-looking statement should be considered in light of the factors discussed in Part I, Item 1A below under “Risk Factors” andelsewhere in this Annual Report on Form 10-K. We caution readers not to place undue reliance on any such forward-looking statements, which speak onlyas of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the U.S. Securities and ExchangeCommission, to publicly update or revise any such statements to reflect any change in company expectations or in events, conditions or circumstances onwhich any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-lookingstatements.AMAG Pharmaceuticals® and Feraheme® are registered trademark of AMAG Pharmaceuticals, Inc. VyleesiTM is a trademark of AMAGPharmaceuticals, Inc. MuGard® is a registered trademark of Abeona Therapeutics, Inc. Makena® is a registered trademark of AMAG Pharma USA, Inc.Intrarosa® is a registered trademark of Endoceutics, Inc. Other trademarks referred in this report are the property of their respective owners.1Table of ContentsITEM 1. BUSINESS:OverviewAMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative productsto patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across arange of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia managementand cancer supportive care, including Feraheme® (ferumoxytol injection) for intravenous (“IV”) use, Makena® (hydroxyprogesterone caproate injection),Intrarosa® (prasterone) vaginal inserts and MuGard® Mucoadhesive Oral Wound Rinse. In addition to our marketed products, our portfolio includes threeproduct candidates, Vyleesi™ (bremelanotide), which is being developed for the treatment of hypoactive sexual desire disorder (“HSDD”) in pre-menopausalwomen, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studiedas an anticoagulant reversal agent.On January 16, 2019, we acquired ciraparantag with our acquisition of Perosphere Pharmaceuticals Inc. (“Perosphere”), a privately-heldbiopharmaceutical company pursuant to an Agreement and Plan of Merger (the “Perosphere Agreement”). Ciraparantag is an anticoagulant reversal agent indevelopment for patients treated with novel oral anticoagulants (“NOACs”) or low molecular weight heparin (“LMWH”) when reversal of the anticoagulanteffect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. For additional information,see below under the heading “Collaboration, License and Other Strategic Agreements - Ciraparantag.”On August 6, 2018, we completed the sale of our wholly-owned subsidiary, CBR Acquisition Holdings Corp, and the Cord Blood Registry® (“CBR”)business to GI Partners (“GI”), a private equity investment firm, pursuant to the June 14, 2018 Stock Purchase Agreement between us and affiliates of GI. Wereceived $519.3 million in cash at closing and recognized a gain of $87.1 million on the sale during the year ended December 31, 2018. Since August 2015,we had provided services related to the preservation of umbilical cord blood stem cell and cord tissue units operated through CBR. For additionalinformation, see Note C, “Discontinued Operations and Held for Sale”, to our consolidated financial statements included in this Annual Report on Form 10-K.We intend to continue to expand the impact of our current and future products for patients by delivering on our growth strategy, which includescollaborating on and acquiring promising therapies at various stages of development, and advancing them through the clinical and regulatory process todeliver new treatment options to patients. Our primary sources of revenue are from sales of Makena, Feraheme and Intrarosa.Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “AMAG.”2Table of ContentsProducts and Product CandidatesThe following table summarizes the current uses and, subject to regulatory approval, potential uses of the products and product candidates we own or towhich we have rights, their current regulatory status and the nature of our rights. Currently, we market and sell our pharmaceutical products solely in the U.S.Products and ProductCandidates Uses and Potential Uses Regulatory Status Nature of RightsFeraheme®(ferumoxytol injection) IV iron replacement therapeutic agent for thetreatment of iron deficiency anemia (“IDA”)in adult patients (a) who have intolerance tooral iron or have had unsatisfactory responseto oral iron or (b) who have chronic kidneydisease (“CKD”). Approved and marketed. Own worldwide rights. Makena®(hydroxyprogesteronecaproate injection)(Intramuscularpresentations (5 mL multi-dose vial and 1 mL single-dose preservative-free vial)and auto-injectorpresentation) A progestin indicated to reduce the risk ofpreterm birth in women pregnant with asingle baby who have a history of singletonspontaneous preterm birth. Approved and marketed. Exclusively license rights to auto-injectordevice for use in the Makena subcutaneousauto-injector presentation (the “Makenaauto-injector”) from Antares Pharma, Inc.(“Antares”).Granted Prasco, LLC ("Prasco") an exclusive,non-sublicensable, nontranferable license topurchase, distribute and sell a genericversion of Makena in the U.S. (“the Makenaauthorized generic”). Intrarosa®(prasterone)vaginal inserts A steroid indicated for the treatment ofmoderate to severe dyspareunia, a symptomof vulvar and vaginal atrophy (“VVA”), dueto menopause. Approved and marketed. Exclusively license rights to develop andcommercialize Intrarosa in the U.S. for thetreatment of VVA and female sexualdysfunction (“FSD”) from Endoceutics, Inc.(“Endoceutics”), subject to certain rightsretained by Endoceutics. MuGard® MucoadhesiveOral Wound Rinse Management of oral mucositis/stomatitisand all types of oral wounds. Cleared and marketed. Exclusively license rights to develop andsell MuGard in the U.S. from AbeonaTherapeutics, Inc. (“Abeona”). Vyleesi™ (bremelanotide)(Auto-injector device) An investigational product designed to bean on demand therapy for the treatment ofHSDD in pre-menopausal women. New Drug Application (“NDA”)accepted in June 2018.Prescription Drug User Fee Act(“PDUFA”) date is June 23,2019. Exclusively license rights to research,develop and sell Vyleesi in North Americafrom Palatin Technologies, Inc. (“Palatin”). AMAG-423 (digoxinimmune fab (ovine)) A polyclonal antibody in development forthe treatment of severe preeclampsia inpregnant women. Phase 2b/3a trial ongoing.Received Fast Track and orphandrug designations. Own worldwide rights. Ciraparantag A small molecule anticoagulant indevelopment as a reversal agent for patientstreated with NOACs or LMWH when reversalof the anticoagulant effect of these productsis needed for emergency surgery, urgentprocedures or due to life-threatening oruncontrolled bleeding. Finalizing Phase 2 trials andplan to initiate Phase 3a trial inthe second half of 2019.Received Fast Trackdesignation. Own worldwide rights.3Table of ContentsFerahemeOverviewFeraheme received approval from the U.S. Food and Drug Administration (the “FDA”) in June 2009 for the treatment of IDA in adult patients with CKD.In February 2018, the FDA approved the supplemental New Drug Application (“sNDA”) to expand the label to include all eligible adult IDA patients whohave intolerance to oral iron or have had unsatisfactory response to oral iron in addition to patients who have CKD. With the expanded Feraheme label, wehave seen and expect to continue to see increased utilization within hematology and oncology clinics and hospitals, and may also see incremental usagewithin gynecologists and gastroenterologists. In 2018, sales of Feraheme accounted for approximately 28% of our total net revenues.The expanded Feraheme label was supported by two positive pivotal Phase 3 trials, which evaluated Feraheme versus iron sucrose or placebo in a broadpopulation of patients with IDA and positive results from a third Phase 3 randomized, double-blind non-inferiority trial that evaluated the incidence ofmoderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension with Feraheme compared to Injectafer® (ferriccarboxymaltose injection) (the “Feraheme comparator trial”). The Feraheme comparator trial demonstrated comparability to Injectafer® based on the primarycomposite endpoint of the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension(Feraheme incidence 0.6%; Injectafer® incidence 0.7%). Adverse event rates were similar across both treatment groups; however, the incidence of severehypophosphatemia (defined by blood phosphorous of <0.2 mg/dl at week 2) was less in the patients receiving Feraheme (0.9% of patients) compared to thosereceiving Injectafer® (50.8% of patients).Iron Deficiency AnemiaCurrently there are two common methods of iron therapy used to treat IDA: oral iron supplements and IV iron. Oral iron is the first-line iron replacementtherapy for most physicians. However, oral iron supplements are poorly absorbed and not well tolerated by some patients, which may adversely impact theireffectiveness, and are associated with certain side effects, such as constipation, diarrhea, and cramping, that may adversely affect patient compliance in usingsuch products. In addition, it can take an extended time for hemoglobin levels to improve following the initiation of oral iron treatment, and even then thetargeted hemoglobin levels may not be reached. Conversely, iron given intravenously allows larger amounts of iron to be delivered to patients in a shortertime frame while avoiding many of the side effects and treatment compliance issues associated with oral iron, and can result in faster rises in hemoglobinlevels. We believe that IV iron is underutilized in IDA patients, and thus a significant opportunity remains to grow the market for IV iron in this patientpopulation.IDA is prevalent in many different patient populations. For many of these patients, treatment with oral iron is unsatisfactory or is not tolerated. It isestimated that approximately five million people in the U.S. have IDA and we estimate that a small fraction of the patients who are diagnosed with IDAregardless of the underlying cause are currently being treated with IV iron. We estimate that the size of the total 2018 U.S. non-dialysis IV iron replacementtherapy market was approximately 1.3 million grams, including patients with IDA due to CKD, gastrointestinal diseases or disorders, inflammatory diseases,chemotherapy-induced anemia and abnormal uterine bleeding (“AUB”).•Chronic Kidney Disease: CKD is a progressive condition that leads to chronic and permanent loss of kidney function. It contributes to thedevelopment of many complications, including anemia, hypertension, fluid and electrolyte imbalances, acid/base abnormalities, bone disease andcardiovascular disease. Anemia, a common condition among CKD patients, is associated with cardiovascular complications, decreased quality oflife, hospitalizations, and increased mortality. Anemia can develop early during the course of CKD and worsens with advancing kidney disease.•Gastrointestinal Disease: It is estimated that among IDA patients referred to gastroenterologists, the rate of gastrointestinal pathology was found tobe approximately 40% - 80%. IDA in patients with gastrointestinal diseases is likely caused by blood loss and/or the inadequate intake orabsorption of iron. Oral iron has been used to treat IDA in patients with gastrointestinal diseases, but its efficacy is variable due to inconsistentbioavailability and absorption, the high incidence of gastrointestinal side effects and patient noncompliance.•Cancer and chemotherapy-induced anemia: IDA is also common in patients with cancer, and it is estimated that 32% - 60% of cancer patients haveiron deficiency, most of whom are anemic. Iron supplementation through both oral and IV administration plays an important role in treating anemiain cancer patients. While there may be some differences in the underlying causes of anemia and iron deficiency in cancer patients who are receivingchemotherapy and those who are not, patients in both categories may develop IDA due to blood loss and/or the inadequate intake or absorption ofiron. Oral iron has been used to treat IDA in cancer patients, but its efficacy is variable due to inconsistent bioavailability and absorption, a highincidence of gastrointestinal side effects, potential interactions with other4Table of Contentstreatments, and patient noncompliance. IV iron has been shown in clinical trials to be well tolerated in the cancer patient population in both patientswho are receiving chemotherapy and those who are not.•Abnormal Uterine Bleeding: IDA is commonly associated with AUB, which is defined as menstrual flow outside of normal volume, duration,regularity, or frequency. AUB can result from multiple underlying causes, including uterine abnormalities, blood disorders, pregnancy, intrauterinedevices, and certain medications. IDA in patients with AUB, regardless of the cause, requires treatment with iron supplementation, either by oral orIV administration.Post-Approval Commitments for FerahemeAs part of our post-approval Pediatric Research Equity Act (“PREA”) requirement to support pediatric labeling of Feraheme for the treatment of CKD, wehad initiated a randomized, active-controlled pediatric study of Feraheme for the treatment of IDA in pediatric CKD patients. During 2015, we suspended thistrial due to difficulty in enrollment. In December 2016, we met with the FDA to advance the development of a plan in order to satisfy this post-approvalcommitment for Feraheme and following continued interactions with the FDA regarding the adequacy of our proposed protocol, we amended the protocoland initiated a new pediatric study in 2018. Further, as part of our post-approval PREA requirement to support pediatric labeling of Feraheme for thetreatment of IDA for the broader label, we submitted a final protocol to the FDA in mid-2018 with the final report submission due to the FDA in November2022.MakenaOverviewMakena is indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth.We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) in November 2014.Makena was approved by the FDA in February 2011 as an intramuscular (“IM”) injection (the “Makena IM product”) packaged in a multi-dose vial andin February 2016 as a single-dose preservative-free vial. The orphan drug exclusivity period that was granted to the Makena IM product in 2011 expired inFebruary 2018. In February 2018, the Makena auto-injector was approved by the FDA for administration via a pre-filled subcutaneous auto-injector, a drug-device combination product. The Makena auto-injector offers an alternative administration option for patients and providers and was designed with features,such as a shorter, thinner, non-visible needle compared to the Makena IM product, to help address some of the known barriers to treatment of recurrentpreterm birth, including the lack of patient acceptance and adherence. Our commercial strategy for Makena currently focuses on driving awareness of theavailability and attributes of the Makena auto-injector and converting current IM prescribers to the Makena auto-injector.In July 2018, simultaneously with the launch of the first generic competitor to Makena, we launched our own authorized generic of both the single- andmulti-dose vials through our generic partner, Prasco. As a result of this partnership, we are able to provide patients and healthcare providers with access totherapeutically equivalent versions of the branded Makena IM injection. Currently, there are two generic competitors in the market in addition to theMakena authorized generic product, and we expect additional generic entrants to enter the market in 2019 to compete against both the 1ml and 5mlpresentations.Makena is administered weekly by a healthcare professional with treatment beginning between 16 weeks and 20 weeks and six days of gestation andcontinuing until 36 weeks and six days of gestation or delivery, whichever happens first. The most common side effects of Makena IM product includeinjection site reactions (pain, swelling, itching, bruising, or a hard bump), hives, itching, nausea, and diarrhea. The most common side effect reported after asingle dose of the Makena auto-injector in healthy post-menopausal women was injection site pain. We currently sell Makena primarily to specialtypharmacies, specialty distributors, and pharmacies which, in turn, sell Makena to healthcare providers, hospitals, government agencies and integrateddelivery networks. In 2018, sales of Makena, including the Makena authorized generic, accounted for approximately 68% of our total net revenues.Preterm BirthMakena is a progestin whose active ingredient is hydroxyprogesterone caproate (“HPC”), which is a synthetic chemical structurally related toprogesterone. Progestins, such as HPC, and progesterone belong to a class of drugs called progestogens. Progestogens have been studied to reduce pretermbirth and have shown varying results depending upon the subjects enrolled. The Society for Maternal Fetal Medicine (the “SMFM”) Publications Committeepublished clinical guidelines for the use of progestogens to reduce the risk of preterm birth in the American Journal of Obstetrics and Gynecology in May2012, and which5Table of Contentswere reaffirmed in January 2017. The SMFM Clinical Guidelines recommend the use of an IM HPC injection to reduce the risk of recurrent preterm birth forclinically indicated patients. Further, in its January 2017 reaffirmation of the 2012 SMFM Clinical Guidelines, the SMFM stated that vaginal progesteroneshould not be considered a substitute for HPC in women with a history of spontaneous preterm birth.Preterm birth is defined as a birth prior to 37 weeks of pregnancy. According to the Centers of Disease Control and Prevention (the “CDC”), preterm birthaffected nearly 400,000 babies born in the U.S. in 2016, or one of every ten infants, with approximately 70% considered late preterm births. In the CDC’sSeptember 2017 National Center for Health Statistics Report, it noted that the preterm birth rate rose in 2016 for the second straight year and attributed therise primarily to an increase in late preterm births, defined as a birth between 34 and 36 weeks of pregnancy. Although the causes of preterm birth are not fullyunderstood, certain women are at a greater risk for preterm birth, including those who have had a previous preterm birth, are pregnant with multiples or havecertain uterine or cervical problems. High blood pressure, pregnancy complications (such as placental problems) and certain other health or lifestyle factorsmay also be contributing factors. Makena is indicated only for use in women who have a history of singleton spontaneous preterm birth who are pregnantwith a single baby, which accounts for approximately 140,000 pregnancies annually in the U.S.Preterm birth can increase the risk of infant death and can also result in serious long-term health issues for the child, including respiratory problems,gastrointestinal conditions, cerebral palsy, developmental delays, and vision and hearing impairments. According to a 2007 report by the Institute ofMedicine (US) Committee on Understanding Premature Birth and Assuring Healthy Outcome, the annual societal economic cost associated with preterm birthis at least $26.2 billion and includes medical and healthcare costs for the baby, labor and delivery costs for the mother, early intervention and specialeducation services, and costs associated with lost work and pay.Post-Approval Commitments for MakenaMakena was approved under the provisions of the FDA’s “Subpart H” Accelerated Approval regulations. The Subpart H regulations allow certain drugs,for serious or life-threatening conditions, to be approved on the basis of surrogate endpoints or clinical endpoints other than survival or irreversiblemorbidity. As a condition of approval under Subpart H, the FDA required that Makena’s sponsor perform certain adequate and well-controlled post-approvalclinical studies to verify and describe the clinical benefit of Makena as well as fulfill certain other post-approval commitments. We have recently completedenrollment and follow up of the confirmatory clinical study of Makena and expect to release the data by the end of the first quarter of 2019. A follow-upstudy of the babies born to mothers from the efficacy and safety clinical study is currently ongoing. We expect to complete the follow up study by July 2020.IntrarosaOverviewIn February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics pursuant to which Endoceutics grantedus the U.S. rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexual intercourse), a symptom ofVVA, due to menopause. Intrarosa was approved by the FDA in November 2016 and was launched commercially in July 2017.Intrarosa is the only FDA-approved vaginal non-estrogen treatment indicated for the treatment of moderate to severe dyspareunia, a symptom of VVA,due to menopause. Intrarosa contains prasterone, a synthetic form of dehydroepiandrosterone (“DHEA”), which is an inactive endogenous (i.e. occurring inthe body) sex steroid. Prasterone is converted by enzymes in the body into androgens and estrogens to help restore the vaginal tissue as indicated byimprovements in the percentage of superficial cells, parabasal cells, and pH. The mechanism of action of Intrarosa is not fully established. The effectivenessof Intrarosa on moderate to severe dyspareunia in post-menopausal women was examined in two primary 12-week placebo-controlled efficacy trials. Womenwho used Intrarosa in these trials experienced a significant reduction in moderate to severe dyspareunia, as well as statistically significant improvements inthe percentage of vaginal superficial cells, parabasal cells and vaginal pH. In these trials, vaginal discharge and atypical pap smears were the most commonadverse reactions. Intrarosa is contraindicated in women with undiagnosed abnormal genital bleeding. The label for Intrarosa contains a precaution that it hasnot been studied in women with a history of breast cancer.6Table of ContentsVulvar and Vaginal Atrophy and DyspareuniaIn the U.S., there are an estimated 64 million post-menopausal women, with approximately half, or 32 million, of those women suffering from symptomsof VVA. Of the 32 million women who suffer from symptoms of VVA, we estimate there are approximately 20 million women in the U.S. who suffer fromdyspareunia, a symptom of VVA, the majority of which we believe suffer from moderate to severe dyspareunia. We estimate that of those women, only 1.7million are currently being treated with prescription therapy. The Women’s Health Initiative, a long-term national health study, which focused on strategiesrelated to estrogen replacement therapy in post-menopausal women, led to class labeling for all estrogen-containing products, including a boxed safetywarning. Intrarosa is not subject to a boxed warning nor any limitations to duration of use as are all other currently approved prescription products to treatVVA.VyleesiOverviewIn January 2017, we entered into a license agreement (the “Palatin License Agreement”) with Palatin pursuant to which we acquired Vyleesi, aninvestigational product designed to treat acquired generalized HSDD in pre-menopausal women. In June 2018, the FDA accepted the Vyleesi NDA. Thecurrent PDUFA date for completion of FDA review of the Vyleesi NDA is June 23, 2019, and if approved on that date, we expect to launch Vyleesi in thesecond half of 2019. In November 2018, as part of our discussions with the FDA regarding its review of the NDA submission for Vyleesi, the FDA requestedadditional data assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi. This Phase 1 study is ongoing and is being conducted inpremenopausal healthy volunteers. We believe that this study can be conducted and data submitted prior to the June 23, 2019 PDUFA date.Vyleesi, a melanocortin 4 receptor agonist is designed to be an on demand therapy used in anticipation of sexual activity and self-administered bypremenopausal women with HSDD in the thigh or abdomen via a single-use subcutaneous auto-injector. Two identically-designed Phase 3 studies evaluatingthe safety and efficacy of Vyleesi compared to placebo were conducted by Palatin for the treatment of HSDD in pre-menopausal women. Both trials consistedof a 24-week double-blind, placebo-controlled, randomized parallel group core study phase, comparing a subcutaneous dose of 1.75 mg Vyleesi versusplacebo, self-administered via an auto-injector, on demand, and patients were equally randomized (1:1 ratio) to either Vyleesi or placebo. The co-primaryendpoints for these trials were evaluated using patient self-reported scores from Question One and Two of the Female Sexual Function Index: Desire Domain(“FSFI-D”) and Question 13 from the Female Sexual Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”). Women who completed the randomized controlcore study phase of either study had the option to continue in an ongoing open-label safety extension phase of the study for an additional 52 weeks, whichgathered additional data on the safety of long-term and repeated use of Vyleesi. Nearly 80% of patients who completed the randomized portion of the studyelected to remain in the open-label portion of the study. All of the patients in the extension study received Vyleesi.Both studies met the pre-specified co-primary efficacy endpoints of improvement in low sexual desire and decrease in related distress as measured usingvalidated patient-reported outcome instruments. For women taking Vyleesi compared to placebo, the change from baseline in low sexual desire, as measuredby the FSFI-D, showed statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3 studies. The medianchange from baseline was 0.60 vs. 0.00 for both studies, and the mean change from baseline was 0.54 vs. 0.24 (p=0.0002) for one study and 0.63 vs. 0.21(p<0.0001) for the other study. Likewise, for women taking Vyleesi compared to placebo, the change from baseline in related distress, as measured by theFSDS-DAO Question 13, also demonstrated statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3studies. The median change from baseline was -1.0 vs. 0.0 for both studies, and the mean change from baseline was -0.7 vs. -0.4 for both studies, with pValuesof <0.0001for one study and 0.0053 for the other study. The change in the number of satisfying sexual events, a key secondary endpoint, was notsignificantly different from placebo in either clinical trial.In the Phase 3 clinical trials, the most frequent adverse events were nausea, flushing, injection site reactions and headache, which were generally mild-to-moderate in severity and were transient. Approximately 18% of patients discontinued participation in the Vyleesi arm due to adverse events in both studiesversus 2% in placebo. The adverse events in the extension portion of the study were consistent with that of the controlled studies described above.7Table of ContentsFemale Sexual Dysfunction and Hypoactive Sexual Desire DisorderFSD is defined as persistent or recurring problems during one or more of the stages of a woman’s sexual response. It is multi-dimensional and can becaused by physiological, psychological, emotional and/or relational factors. FSD can also have a major impact on a woman’s sexual relationships,interpersonal relationships, quality of life, and even their general well-being. HSDD is the most common type of FSD and is characterized by a lack of sexualthoughts and desire for sexual activity, which causes a woman distress or puts a strain on the relationship with her partner, and cannot be accounted for byanother medical, physical or psychiatric condition, co-morbidity of another condition or the effects of a medication. Studies suggest that approximately 15million women in the U.S. are affected by HSDD and approximately 5.8 million of these women are pre-menopausal and have a primary diagnosis of HSDD.Despite one FDA-approved HSDD therapy on the market today for pre-menopausal women, we believe that patient awareness and understanding of thecondition is extremely low, and that few women currently seek treatment. HSDD may go undiagnosed due to various factors such as embarrassment or stigma,lack of awareness of low sexual desire as a medical condition or attribution to other external factors, such as stress or fatigue. Market research commissionedby Palatin indicates that 95% of pre-menopausal women suffering from low desire with associated distress are unaware that HSDD is a treatable medicalcondition. As a result, assuming FDA approval of our NDA for Vyleesi, we expect that the initial focus of our Vyleesi commercialization efforts will be raisingawareness and education about the disease for both healthcare professionals and patients with this disorder. During 2018, we launched an unbrandedinitiative to bring awareness of the HSDD condition to healthcare professionals. We are also working with and funding the Alliance for Advancing Women’sHealth, an organization seeking to improve outcomes for women’s sexual health.AMAG-423OverviewIn September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 (the“Velo Agreement”) with Velo Bio, LLC, a privately-held life sciences company (“Velo”). AMAG-423 is a polyvalent antibody currently in development forthe treatment of severe preeclampsia in pregnant women and has been granted both orphan drug and Fast Track designations by the FDA. AMAG-423 isintended to bind to endogenous digitalis-like factors (“EDLFs”) and remove them from the circulation. EDLFs appear to be elevated in preeclampsia and mayplay an important role in the pathogenesis of preeclampsia. By decreasing EDLFs, AMAG-423 is believed to improve vascular endothelial function and leadto better post-delivery outcomes in affected mothers and their babies.We have assumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of thefuture clinical, regulatory and other costs required to pursue FDA approval. Approximately 200 antepartum women with severe preeclampsia between 23 and32 weeks gestation will be enrolled in the multi-center, randomized, double-blind, placebo-controlled, parallel-group Phase 2b/3a study. We have re-initiatedthe study as the sponsor, and have begun reactivating the current sites, seeking new sites and, as of January 2019, enrolling new patients. Participants in thestudy receive either AMAG-423 or placebo intravenously four times a day over a maximum of four days. The study’s primary endpoint is to demonstrate areduction in the percentage of babies who develop severe intraventricular hemorrhage (bleeding in the brain), necrotizing enterocolitis (severe inflammationof the infant bowels) or death by 36 weeks corrected gestational age between the AMAG-423 and placebo arms. Secondary endpoints include the changefrom baseline in maternal creatinine clearance, maternal incidence of pulmonary edema during treatment and the period of time between treatment anddelivery. In an effort to accelerate enrollment, we intend to increase the number of trial sites, including potentially initiating sites outside of the U.S., and aretargeting to complete enrollment of the Phase 2b/3a study by the end of 2019.PreeclampsiaPreeclampsia is a multi-system disorder that occurs only during pregnancy and the postpartum period and affects both the mother and baby. Preeclampsiais the leading cause of maternal morbidity and mortality and typically develops in women after 20 weeks of pregnancy and is characterized by elevatedblood pressure, as well as vascular abnormalities, that can lead to end organ damage, intrauterine growth restriction and premature delivery. Prematuredelivery can lead to a number of serious health consequences for the infant, including intraventricular hemorrhage or necrotizing enterocolitis.Approximately 140,000 pregnant women in the U.S. are affected by preeclampsia, with approximately 50,000 impacted by severe preeclampsia, a moreserious form of the condition that can be life threatening to both the mother and the baby. Severe preeclampsia can result in acute, as well as long-term,complications and a progressive deterioration in the clinical presentation for both the mother and the baby. There are currently no effective or FDA-approvedtreatments that address the underlying pathophysiology of preeclampsia or severe preeclampsia. The management of severe preeclampsia is focused onmedications to address the symptoms, such as antihypertensives for the urgent control of severe hypertension and magnesium sulfate for the prevention ofseizures as well as early delivery of the baby.8Table of Contents CiraparantagIn January 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small moleculeanticoagulant reversal agent in development as a single dose solution that is delivered intravenously to reverse the effects of certain NOACs(Xarelto®(rivaroxaban), Eliquis®(apixaban), and Savaysa®(edoxaban), as well as Lovenox® (enoxaparin sodium injection), a LMWH), when reversal of theanticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. Ciraparantaghas been granted Fast Track designation by the FDA and we intend to seek orphan drug designation and Breakthrough Therapy designation in 2019.Warfarin, a vitamin K antagonist, was the first FDA-approved oral anticoagulant and for over 60 years was the only oral anticoagulant used in the U.S.Although warfarin is effective in the prevention of thromboembolism, its use necessitates frequent blood monitoring, dose adjustments and dietaryrestrictions. The first FDA-approved NOAC was Pradaxa®(dabigatran), which was introduced to the U.S. market in 2010. Since then Xarelto®, Eliquis® andSavaysa® were approved by the FDA as an alternative mechanism of action to warfarin in inhibiting the body’s ability to form blood clots. These NOACsoffer similar efficacy to warfarin in reducing thromboembolism but are notably safer with respect to serious bleeding events and do not require monitoring foreffectiveness.The use of NOAC therapy represents the fastest-growing segment of the anticoagulant market in the U.S. with approximately six million patients in theU.S. and nine million patients in certain ex-U.S. countries currently on NOAC and LMWH therapy. In January 2019, the American Heart Association releasedupdated guidelines recommending the use of NOACs over warfarin in the majority of patients with atrial fibrillation. Bleeding is the major complication ofanticoagulant treatment, particularly for those patients coming in for emergency surgery or other urgent procedures. Approximately 1.5% to 2.0% of patientson NOACs are at risk for serious bleeding complications each year. Prior to 2015, there were no FDA-approved reversal agents for these anticoagulants.Currently, Praxbind®(idarucizumab) is approved for the reversal of Pradaxa® and AndexXa® (coagulation factor Xa (recombinant), inactivated-zhzo) isapproved for the reversal of Eliquis® and Xarelto® and is also in development for the reversal of Savaysa® and Lovenox®.Ciraparantag has been evaluated in more than 250 healthy volunteers across seven clinical trials. A first in human Phase 1 study evaluated the safety,tolerability, pharmacokinetic, and pharmacodynamic effects of ciraparantag alone and following a single dose of Savaysa®, and another Phase 1 studyevaluated the overall metabolism of the drug. Two Phase 1/2 studies evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects relatedto the reversal of unfractionated heparin and Lovenox® and three Phase 2b randomized, single-blind, placebo-controlled dose-ranging studies evaluated thereversal of Savaysa®, Eliquis®, and Xarelto® to assess the safety and efficacy of ciraparantag, each of which included 12 subjects dosed with ciraparantag. ThePhase 2b studies to reverse Xarelto® and Eliquis® are currently ongoing; however, both studies are approximately two-thirds complete, with the low dosecohort expected to finish in the first half of 2019. In these Phase 2b clinical trials, ciraparantag or placebo was administered to healthy volunteers in a blindedfashion after achieving steady blood concentrations of the respective anticoagulant. Pharmacodynamic assessments of whole blood clotting time (“WBCT”),an important laboratory measure of clotting capacity, were sampled frequently for the first hour post study drug dose, and then periodically thereafter out to24 hours post administration of study drug. Key endpoints in the Phase 2 trials included mean change from baseline in WBCT and the proportion of subjectsthat returned to within 10% of their baseline WBCT. Subjects in these studies experienced a rapid and statistically significant (p<0.001) reduction in WBCTcompared to placebo as early as 15 minutes after the administration of ciraparantag in each of the four studies and the effect was sustained for 24 hours.Moreover, in both the Eliquis® and Xarelto® studies, 100% of subjects in the highest dose cohorts (180 mg of ciraparantag) were responders, as defined by areturn to within 10% of baseline WBCT within 30 minutes and sustained for at least six hours. Ciraparantag has been well tolerated in clinical trials, with themost common related adverse events to date being mild sensations of coolness, warmth or tingling, skin flushing, and alterations in taste. There have been nodrug-related serious adverse events to date.Following the completion of the Phase 2b studies, we plan to conduct an End of Phase 2 meeting with the FDA to confirm the design of our Phase 3atrials in healthy volunteers, designed to determine the lowest effective dose of ciraparantag. We expect the Phase 3a program will include one Phase 3a trialfor each of the four anticoagulants under investigation for ciraparantag reversal in which healthy volunteers will be brought to steady state on each of theanticoagulant (Xarelto®, Savaysa®, Eliquis®, and Lovenox®), and then administered ciraparantag. We expect the effects will be measured frequently bymeasuring WBCT using an automated coagulometer. The primary endpoint for the study is expected to be the proportion of subjects who return to within10% of their baseline WBCT as well as safety outcomes. We intend to initiate the Phase 3a trials in the second half of 2019.9Table of ContentsThe Phase 3a trials are expected to be followed by a Phase 3b/4 trial in patients who are currently taking Eliquis®, Xarelto®, Savaysa® or Lovenox® andexperience life-threatening or uncontrolled bleeding or require an urgent procedure or surgery that necessitates rapid reversal of their anticoagulant. This trialis expected to evaluate the safety and effectiveness of ciraparantag in the target patient population focusing on the proportion of patients returning to normalWBCT and have evidence of hemostasis as determined by an adjudicated clinical evaluation. Based on previous precedent, we expect the trial to be an openlabel study with approximately 250 patients and believe that only a portion of the patients in the Phase 3b/4 trial will be required to complete the study atthe time of our NDA submission. It is expected that the remainder of the study will be completed as a post-marketing commitment. In addition, we have contracted with Perosphere Technologies Inc. (“Perosphere Technologies”), an independent company, which is developing anautomated coagulometer designed to rapidly and accurately measure WBCT. Due to the variability of measuring WBCT manually, the coagulometer will beused in our Phase 3a and 3b/4 trials to measure WBCT, which is being used as a surrogate marker to demonstrate reversal of anticoagulation followingciraparantag administration. Prior to its use in our Phase 3a trial, Perosphere Technologies will be required to obtain an Investigational Device Exemption(“IDE”) approval for its coagulometer, which will require Perosphere Technologies to show that the device is safe and effective to use in our clinical trials.Perosphere is a party to a clinical trial collaboration agreement with a global pharmaceutical company under which Perosphere agreed to usecommercially reasonable efforts to develop and commercialize ciraparantag for use as an anticoagulant reversal agent to reverse the effects ofSavaysa®(edoxaban) and LMWH in the U.S. and the European Union (“EU”). Pursuant to this agreement, we have established a joint study management teamto oversee studies and regulatory activities under the agreement and we are entitled to receive research and development milestone payments, anticipated in2019 and 2020, if we complete certain clinical trial deliverables and for so long as we do not prioritize other specified development programs, or otherwisedelay or hinder our efforts with Savaysa®. While this pharmaceutical company does not have any current commercial rights to ciraparantag, at its request, weare required to negotiate in good faith for the U.S. or EU. commercialization rights for ciraparantag if we have not otherwise entered into a licensingagreement or other arrangement.MuGardMuGard is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oralwounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures orbraces. We acquired the U.S. commercial rights to MuGard under a June 2013 license agreement with Abeona (the “MuGard Rights”). MuGard was launchedin the U.S. by Abeona in 2010 after receiving 510(k) clearance from the FDA.Collaboration, License and Other Strategic AgreementsOur commercial strategy includes expanding our portfolio through the in-license or acquisition of additional pharmaceutical products or companies,including revenue-generating commercial products and assets in various stages of development. We are currently a party to the following collaborations andother arrangements:EndoceuticsIn February 2017, we entered into the Endoceutics License Agreement with Endoceutics to obtain an exclusive right to commercialize Intrarosa for thetreatment of VVA and FSD in the U.S. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa forthe treatment of VVA and, if approved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa forthe treatment of VVA and FSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to ourreview and approval and our right to withhold approval in certain instances. Each party’s commercialization activities and budget are described in acommercialization plan, which is updated annually.Under the terms of the Endoceutics License Agreement, we made an upfront payment of $50.0 million and issued 600,000 shares of unregisteredcommon stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the date of closing. In addition, we paid Endoceutics $10.0million in 2017 upon the delivery by Endoceutics of Intrarosa launch quantities and $10.0 million in 2018 following the first anniversary of the closing.Endoceutics is also eligible to receive certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggeredwhen annual net U.S. sales of Intrarosa exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual netU.S. sales of Intrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone paymentstotaling up to $850.0 million, which would be triggered at various sales thresholds. In10Table of Contentsaddition, we pay tiered royalties to Endoceutics equal to a percentage of net sales of Intrarosa in the U.S. ranging from mid-teens for calendar year net sales upto $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion (such royalty rate to be dependent on the aggregate annualnet sales of Intrarosa in the U.S.) for the commercial life of Intrarosa, subject to certain deductions.In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women, which is nowfully enrolled. Upon review of the full data set, it will be determined whether to continue to pursue an additional clinical trial to support an eventual filingwith the FDA for an HSDD indication. We have agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding upto $20.0 million, of which we have paid approximately $6.0 million.The Endoceutics License Agreement grants us the right to develop and commercialize pharmaceutical products containing DHEA, including Intrarosa, atdosage strengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding any combinations with other active pharmaceuticalingredients, in the U.S. for the treatment of VVA and FSD. Under the Endoceutics License Agreement, except for any compounds or products affecting themelanocortin receptor pathway, including without limitation, Vyleesi (collectively, “Excluded Products”), we are not permitted to research, develop,manufacture, or commercialize (a) DHEA for delivery by any route of administration anywhere in world, (b) any compound (including DHEA) or product foruse in VVA anywhere in the world, or (c) commencing on the date of an approval of Intrarosa for the treatment of FSD in the U.S. and continuing for theremainder of the term of the Endoceutics License Agreement, any compound (including DHEA) for use in FSD (each, a “Competing Product”). Anycompound or product for use in FSD that would be a Competing Product in the U.S. but that (a) does not contain DHEA and (b) was acquired or licensed orfor which the research, development, manufacture or commercialization of such compound or product is initiated by us or our affiliates, in each case, prior tothe date of an approval of Intrarosa for the treatment of FSD in the U.S., will be an Excluded Product and will not be subject to the exclusivity obligationsunder the Endoceutics License Agreement for the treatment of FSD, subject to certain restrictions in the Endoceutics License Agreement. These noncompeterestrictions are subject to certain exclusions relating to the acquisition of competing programs.The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated, including byeither party for material breach that is uncured after a 90-day notice period (subject to certain extensions and dispute resolutions provisions). Either partymay terminate under certain situations relating to the bankruptcy or insolvency of the other party. We may terminate the Endoceutics License Agreement fora valid business reason upon 365 days prior written notice to Endoceutics; or upon 60 days written notice in the event we reasonably determine in good faith,after due inquiry and after discussions with Endoceutics, that we cannot reasonably continue to develop or commercialize the product as a result of a safetyissue regarding the use of Intrarosa. We may also terminate the Endoceutics License Agreement upon 180 days’ notice if there is a change of control ofAMAG and the acquiring entity (alone or with its affiliates) is engaged in a competing program (as defined in the Endoceutics License Agreement) in the U.S.or in at least three countries within the EU.In April 2017, we entered into an exclusive commercial supply agreement with Endoceutics pursuant to which Endoceutics, itself or through affiliates orcontract manufacturers, agreed to manufacture and supply Intrarosa to us (the “Endoceutics Supply Agreement”) and is our exclusive supplier of Intrarosa inthe U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure (as such terms are defined inthe Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceutics has agreed to maintain at all times a second source supplier forthe manufacture of DHEA and the drug product and to identify, validate and transfer manufacturing intellectual property to the second source supplier byApril 2019. The Endoceutics Supply Agreement will generally remain in effect until the termination of the Endoceutics License Agreement.PalatinIn January 2017, we entered into the Palatin License Agreement with Palatin under which we acquired (a) an exclusive license in all countries of NorthAmerica (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize Vyleesi and any other products containingbremelanotide (collectively, the “Vyleesi Products”), (b) a worldwide non-exclusive license, with the right to grant sub-licenses, to manufacture the VyleesiProducts, and (c) a non-exclusive license in all countries outside the Palatin Territory, with the right to grant sub-licenses, to research and develop (but notcommercialize) the Vyleesi Products.Under the terms of the Palatin License Agreement, we made an upfront payment to Palatin of $60.0 million in February 2017 and subject to agreed-upondeductions, we reimbursed Palatin approximately $25.0 million for reasonable, documented, out-of-pocket expenses incurred by Palatin in connection withthe development and regulatory activities necessary to submit an NDA in the U.S. for Vyleesi for the treatment of acquired HSDD in pre-menopausal women.In June 2018, our NDA11Table of Contentssubmission to the FDA for Vyleesi was accepted, which triggered a $20.0 million milestone payment, which we paid to Palatin in the second quarter of 2018.In addition, the Palatin License Agreement requires us to make contingent payments of (a) $60.0 million upon FDA approval of Vyleesi, and (b) up to $300.0million of aggregate sales milestone payments upon the achievement of certain annual net sales milestones over the course of the license. The first salesmilestone payment of $25.0 million will be triggered when Vyleesi annual net sales exceed $250.0 million. We are also obligated to pay Palatin tieredroyalties on annual net sales in North America of the Vyleesi Products, on a product-by-product basis, in the Palatin Territory ranging from the high-singledigits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (a) the earliest dateon which there are no valid claims of Palatin patent rights covering such Vyleesi Product in such country, (b) the expiration of the regulatory exclusivityperiod for such Vyleesi Product in such country and (c) ten years following the first commercial sale of such Vyleesi Product in such country. These royaltiesare subject to reduction in the event that: (x) we must license additional third-party intellectual property in order to develop, manufacture or commercialize aVyleesi Product or (y) generic competition occurs with respect to a Vyleesi Product in a given country, subject to an aggregate cap on such deductions ofroyalties otherwise payable to Palatin. After the expiration of the applicable royalties for any Vyleesi Product in a given country, the license for such VyleesiProduct in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license.The Palatin License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordance withthe agreement. In addition, we have the right to terminate the Palatin License Agreement without cause, in its entirety or on a product-by-product andcountry-by-country basis upon at least 180 days’ prior written notice to Palatin. Either party may terminate the Palatin License Agreement for cause if theother party materially breaches or defaults in the performance of its obligations, and, if curable, such material breach remains uncured for 90 days.VeloIn September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 withVelo, the terms of which were amended at the time of exercise. In connection with the exercise of the option and consummation of the acquisition, we haveassumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the clinical,regulatory and other costs required to pursue FDA approval. As part of the acquisition, in September 2018 we paid Velo an upfront option exercise fee of$12.5 million. We are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of AMAG-423. In addition, we are obligated to pay salesmilestone payments to Velo of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and $900.0million and low-single digit royalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velowith a third-party, including a $5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterly installments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-single digit royalties based on net sales.PerosphereOn January 16, 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small moleculeanticoagulant reversal agent. Pursuant to the Perosphere Agreement, in January 2019, we paid approximately $50.0 million, subject to adjustments forworking capital, cash, transaction expenses and specified indebtedness, approximately $40.0 million of which was funded from our available cash andapproximately $10.0 million of which was deemed paid in connection with the cancellation of a convertible note in the principal amount of $10.0 millionissued to us by Perosphere in October 2018. The purchase price is subject to customary post-closing adjustments under the Perosphere Agreement. Inaddition, we used available cash to repay $12.0 million of Perosphere’s term loan indebtedness and assumed approximately $6.2 million of Perosphere’sother liabilities. We are obligated to pay future contingent consideration of up to an aggregate of $365.0 million (the “Milestone Payments”), including (a)up to an aggregate of $140.0 million that becomes payable upon the achievement of specified regulatory milestones for ciraparantag (the “RegulatoryMilestone Payments”), including a $40.0 million milestone payment upon approval of ciraparantag by the European Medicines Agency and (b) up to anaggregate of $225.0 million that becomes payable conditioned upon the achievement of specified sales milestones (the “Sales Milestone Payments”). If thefinal label approved for ciraparantag in the U.S. includes a boxed warning, the Regulatory Milestone Payments shall no longer be payable, and anypreviously paid Regulatory Milestone Payments shall be credited against 50% of any future Milestone Payments that otherwise becomes payable. The firstSales Milestone Payment of $20.0 million will be payable upon annual net sales of ciraparantag of at least $100.0 million. Additional details regarding thePerosphere Agreement can be found in Note W, “Subsequent Events,” to our consolidated financial statements included in this Annual Report on Form-10-K.12Table of ContentsPrascoIn December 2017, we entered into a Distribution and Supply Agreement (the “Prasco Agreement”) with Prasco, under which Prasco was granted anexclusive, non-sublicensable, nontranferable license to purchase, distribute and sell a generic version of Makena in the U.S. In July 2018, Prasco launchedthe Makena authorized generic of both the single-dose and multi-dose intramuscular injections. Under the Prasco Agreement, we are responsible for themanufacture and supply of the Makena authorized generic to be sold to Prasco at a predetermined supply price. Prasco is also required to pay us a certainpercentage of the net distributable profits from the sale of the Makena authorized generic. Pursuant to the terms of the Prasco Agreement, in certaincircumstances we have reimbursed and may be required to reimburse additional charges incurred by Prasco if we are unable to supply a certain percentage ofproduct ordered by Prasco in a prespecified timeframe. The Prasco Agreement expires on July 2, 2022, which term will be automatically extended thereafterfor additional one year periods, unless canceled by us or Prasco within an agreed-upon notice period. The Prasco Agreement is subject to early termination byus for convenience after a certain period of time or if Prasco is subject to a change of control or by either party for, among other things, uncured breach by orbankruptcy of the other party, lack of commercial viability or FDA notice, or by mutual agreement.AntaresIn connection with a development and license agreement (the “Antares License Agreement”) with Antares we have an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, to develop, use, sell, offerfor sale and import and export the Makena auto-injector. Under the terms of the Antares License Agreement, as amended in March 2018, we are responsiblefor the clinical development and preparation, submission and maintenance of all regulatory applications in each country where we desire to market and sellthe Makena auto-injector, including the U.S. We are required to pay royalties to Antares on net sales of the Makena auto-injector for the Antares RoyaltyTerm. The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of the Makena auto-injector and decreaseafter the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. In addition, weare required to pay Antares sales milestone payments upon the achievement of certain annual net sales. The Antares License Agreement terminates at the endof the Antares Royalty Term, but is subject to early termination by us for convenience and by either party upon an uncured breach by or bankruptcy of theother party. See below under “Manufacturing” for a description of the manufacturing agreement entered into with Antares in March 2018.AbeonaIn June 2013, we entered into a license agreement (the “MuGard License Agreement”) with Abeona under which Abeona granted us an exclusive,royalty-bearing license, with the right to grant sublicenses, to certain intellectual property rights, including know-how, patents and trademarks, to use,import, offer for sale, sell, manufacture and commercialize MuGard in the U.S. and its territories and possessions (the “MuGard Territory”) for themanagement of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries),including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces.In consideration for the license, we paid Abeona an upfront license fee of $3.3 million in June 2013. We are required to pay royalties to Abeona on netsales of MuGard in the MuGard Territory until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the first commercial sale ofMuGard in the MuGard Territory (the “MuGard Royalty Term”). These tiered, double-digit royalty rates decrease after the expiration of the licensed patents.After the expiration of the MuGard Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in the MuGard Territory.Abeona remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement under which we purchaseMuGard inventory from them. Abeona is responsible for maintenance of the licensed patents at its own expense, and we retain the first right to enforce anylicensed patent against third-party infringement. The MuGard License Agreement terminates at the end of the MuGard Royalty Term, but is subject to earlytermination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party.ManufacturingOverviewWe do not own or operate facilities for the manufacture of our commercially distributed products or for our product candidates. We rely solely on third-party contract manufacturers and our licensors (who, in turn, may also rely on third-party contract manufacturers) to manufacture our products for ourcommercial and clinical use. Our third-party drug product contract manufacturing facilities, and those of our licensors, are subject to current goodmanufacturing practices (“cGMP”) and13Table of Contentsregulations enforced by the FDA through periodic inspections to confirm such compliance. We target to maintain, where possible, second source suppliersand/or sufficient inventory levels throughout our supply chain to meet our projected near-term demand for all of our products in order to minimize risks ofsupply disruption. We intend to continue to outsource the manufacture and distribution of our products for the foreseeable future, and we believe thismanufacturing strategy will enable us to direct more of our financial resources to the commercialization and development of our products and productcandidates.To support the commercialization and development of our products, we have developed a fully integrated manufacturing support system, includingquality assurance, quality control, regulatory affairs and inventory control policies and procedures. These support systems are intended to enable us tomaintain high standards of quality for our products.In connection with the acquisition of Perosphere, we assumed the lease on a development facility, which is not currently being utilized.FerahemeWe are party to a Commercial Supply Agreement with Sigma-Aldrich, Inc. (“SAFC”) pursuant to which SAFC agreed to manufacture and we agreed topurchase the API for use in the finished drug product of ferumoxytol for commercial sale as well as for use in clinical trials (as amended, the “SAFCAgreement”). Subject to certain conditions, the SAFC Agreement provides that we purchase all of our API from SAFC. The SAFC Agreement has an initialterm that ends December 31, 2020, which may be automatically extended thereafter for additional two year periods, unless canceled by us or SAFC within anagreed-upon notice period.We are party to a Pharmaceutical Manufacturing and Supply Agreement with Patheon, Inc. (“Patheon”) pursuant to which Patheon agreed to manufactureferumoxytol finished drug product for commercial sale and for use in clinical trials (as amended, the “Patheon Agreement”). The Patheon Agreement willcontinue in force until December 31, 2020. The Patheon Agreement may be terminated at any time upon mutual written agreement by us and Patheon or atany time by us subject to certain notice requirements and early termination fees. In addition, the Patheon Agreement may be terminated by either us orPatheon in the event of a material breach of the agreement by the other party provided that the breaching party fails to cure such breach within an agreed-upon notice period.We have also entered into a manufacturing and supply agreement with a second source supplier to produce ferumoxytol finished drug product inaddition to Patheon, which second source supplier was approved by the FDA in 2019.MakenaThe Makena drug product for our commercial and clinical use is currently manufactured by Pfizer Inc. (“Pfizer”) (McPherson facility, formerly Hospira,Inc.) under a Development and Supply Agreement (as amended and restated, the “Pfizer Agreement”). The Pfizer Agreement requires that we satisfy certainminimum purchase requirements and expires on December 31, 2022, which term will be automatically extended thereafter for additional 18 month periods,unless canceled by us or Pfizer within an agreed-upon notice period. Due to continued manufacturing issues at the Pfizer McPherson manufacturing facility,we are currently experiencing a supply disruption of our Makena IM products, which has resulted in both our single-dose and multi-dose branded Makenavials being out-of-stock, as well as periodic supply disruptions and loss of market share for the authorized generic. We also have an agreement with a secondsource manufacturer for the Makena 1 mL drug product with Piramal Pharma Solutions (formerly Coldstream Laboratories, Inc.).In June 2018, we entered into a commercial supply agreement with SAFC, Inc. (“SAFC Makena”) to supply us with API for use in the finished Makenaproduct (the “SAFC Makena Agreement”). The SAFC Makena Agreement requires that we satisfy certain minimum purchase requirements, but we are notobligated to use SAFC Makena as our sole supplier of Makena API. The SAFC Makena Agreement expires on June 4, 2021, which term will be automaticallyextended thereafter for additional two year periods, unless canceled by us or SAFC Makena within an agreed-upon notice period. The SAFC MakenaAgreement may be terminated by either us or SAFC Makena in the event of a material breach of the agreement by the other party provided that the breachingparty fails to cure such breach within an agreed-upon notice period or insolvency by either party.In June 2017, we entered into a product supply agreement with Pfizer (Kalamazoo facility) to supply us with the API for use in the finished Makenaproduct (the “Pfizer API Agreement”). The Pfizer API Agreement requires that we satisfy certain minimum purchase requirements. The Pfizer API Agreementexpires on June 1, 2020, which term will be automatically extended thereafter for additional one year periods, unless canceled by us or Pfizer within anagreed-upon notice period. The14Table of ContentsPfizer API Agreement may be terminated by either us or Pfizer in the event of an uncured material breach by or insolvency of the other party.Antares is the exclusive supplier for the auto-injection devices needed for the Makena auto-injector. In March 2018, we entered into the AntaresManufacturing Agreement that sets forth the terms and conditions pursuant to which Antares agreed to sell to us on an exclusive basis, and we agreed topurchase, the fully packaged Makena auto-injector for commercial distribution. Antares is responsible for the manufacture and supply of the devicecomponents and assembly of the Makena auto-injector and we are responsible for the supply of the Makena drug substance in pre-filled syringes to be usedin the assembly of the finished auto-injector product. The Antares Manufacturing Agreement terminates at the expiration or earlier termination of the AntaresLicense Agreement, but is subject to early termination by us for certain supply failure situations, and by either party upon an uncured breach by orbankruptcy of the other party or our permanent cessation of commercialization of the Makena auto-injector for efficacy or safety reasons.In September 2018, we entered into a contract manufacturing agreement with Fresenius Kabi Austria GmbH (“Fresenius”) to manufacture the pre-filledsyringes used in the Makena auto-injector product (the “Fresenius Agreement”). The Fresenius Agreement requires that we satisfy certain minimum purchaserequirements, but we are not obligated to use Fresenius as our sole supplier of pre-filled syringes. The Fresenius Agreement will continue for a set period oftime, including mutually agreed to additional renewals, but may be terminated by either us or Fresenius in the event of an uncured material breach by orinsolvency of the other party, by Fresenius if we undergo a change of control to a competitor of Fresenius or by us if Fresenius fails to obtain or maintain anymaterial government licenses or approvals.IntrarosaUnder the terms of the Endoceutics Supply Agreement, Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufacture andsupply Intrarosa to us and is our exclusive supplier of Intrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of acessation notice or supply failure. Endoceutics is developing internal manufacturing capabilities for Intrarosa, for which it expects to obtain approval in2019, which would give them additional manufacturing capacity. The Endoceutics Supply Agreement will generally remain in effect until the termination ofthe Endoceutics License Agreement.MuGardUnder the terms of the MuGard License Agreement, Abeona is responsible for all aspects of manufacturing MuGard. We have entered into a supplyagreement with Abeona under which we purchase MuGard inventory from Abeona. Our inventory purchases are at the price actually paid by Abeona topurchase it from a third-party plus a mark-up to cover administration, handling and overhead.Products in DevelopmentUnder the Palatin License Agreement, we assumed a long-term commercial supply agreement with Catalent Belgium S.A. for drug product manufactureand packaging services for Vyleesi. In June 2018, we entered into a commercial supply agreement with Lonza Ltd. to supply us with the API for use in thefinished Vyleesi product. In addition, in December 2018, we entered into a commercial supply agreement with Ypsomed AG to supply us with the devicecomponents of the auto-injector for use in the finished Vyleesi product. All of these agreements have certain minimum purchase requirements.We have recently entered into an exclusive agreement with Protherics UK Ltd, a subsidiary of BTG plc (“BTG”), for the manufacture of AMAG-423 drugsubstance for use in the AMAG-423 commercial product (the “BTG Agreement”). BTG has also agreed to supply drug product for our current ongoingclinical trial. BTG owns the rights to digoxin immune fab (ovine), the active ingredient of AMAG-423, which has been marketed in the U.S. for many years asan FDA-approved treatment for patients with life-threatening or potentially life-threatening digoxin toxicity or overdose. Under the terms of the BTGAgreement, we are required to differentiate our product from their product, DigiFab®, including without limitation, via labeling, dosage and/or formulationand if we are unable to show differentiation, we may be in breach of the agreement and be subject to penalties. In addition, the BTG Agreement provides thatwe satisfy certain minimum purchase requirements. We will need to enter into an additional agreement to manufacture AMAG-423 drug product, especially ifit is approved and we need to meet commercial demand.We have also assumed a commercial supply agreement with PolyPeptide Group for the supply of ciraparantag drug substance. We will need to enter intoan additional agreement to manufacture ciraparantag drug product, especially if it is approved and we need to meet commercial demand.15Table of ContentsRaw MaterialsWe, our licensors and our respective third-party manufacturers currently purchase certain raw and other materials used to manufacture our products fromthird-party suppliers and, at present, do not have long-term supply contracts with most of these third parties. Although certain of our raw or other materials arereadily available, others may be obtained only from qualified suppliers. The qualification of an alternative source may require repeated testing of the newmaterials and generate greater expenses to us or our licensors if materials that we test do not perform in an acceptable manner. In addition, we, our licensors orour respective third-party manufacturers sometimes obtain raw or other materials from one vendor only, even where multiple sources are available, tomaintain quality control and enhance working relationships with suppliers, which could make us susceptible to price inflation by the sole supplier, therebyincreasing our production costs. As a result of the high-quality standards imposed on our raw or other materials, we, our licensors or our respective third-partymanufacturers may not be able to obtain such materials of the quality required to manufacture our products from an alternative source on commerciallyreasonable terms, or in a timely manner, if at all.Patents, Trademarks and Trade SecretsWe consider the protection of our technology to be material to our business. Because of the substantial length of time and expense associated withbringing new products through development and regulatory approval to the marketplace, we place considerable importance on obtaining patent protectionand maintaining trade secret protection for our products and product candidates. Our success depends, in large part, on our ability, and the ability of ourlicensors, collaborators and other business partners to maintain the proprietary nature of our technology and other trade secrets. To do so, we must prosecuteand maintain existing patents, obtain new patents and ensure trade secret protection. We must also operate without infringing the proprietary rights of thirdparties or allowing third parties to infringe our rights. Our policy is to aggressively protect our competitive technology position by a variety of means,including applying for or obtaining rights to patents in the U.S. and in foreign countries.One of our U.S. Feraheme patents received a patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, asamended, (the “Hatch-Waxman Act”) and will expire in June 2023, and the other U.S. patents relating to Feraheme will expire in 2020. In addition, in March2018, we and Sandoz Inc. (“Sandoz”) entered a stipulation of dismissal pursuant to a settlement agreement that dismissed and resolved a patent infringementsuit regarding an ANDA submitted to the FDA by Sandoz. According to the terms of the settlement, if Sandoz receives FDA approval of its ANDA by a certaindate, Sandoz may launch its generic version of Feraheme on July 15, 2021, or earlier under certain circumstances customary for settlement agreements of thisnature. Sandoz will pay a royalty on the sales of its generic version of Feraheme to us until the expiration of the last Feraheme patent listed in the OrangeBook. If Sandoz is unable to secure approval by such date, Sandoz will launch an authorized generic version of Feraheme supplied by us on July 15, 2022 forup to 12 months. Sandoz’s right to distribute, and our obligation to supply, the authorized generic product shall be in accordance with standard commercialterms and profit splits. Our U.S. patent related to the Makena auto-injector product will expire in 2036, and we have a pending patent application related to the Makena auto-injector product. In addition, we have a license to several U.S. patents and patent applications from Antares related to the Makena auto-injector device anddrug-device combination with expiration dates between 2019 and 2034. Our issued patent and Antares’ eligible patents are listed in the Orange Book for theMakena auto-injector product. There are no issued patents covering the Makena IM product.Under the Palatin License Agreement, we have exclusive rights to a number of U.S. and foreign patents and applications related to Vyleesi that are ownedby Palatin. Certain of Palatin’s patents include claims directed to the Vyleesi drug composition of matter and methods of use thereof with terms expiring in2020, and other patents include claims directed to methods of treating FSD by subcutaneous administration of compositions that include Vyleesi with termsexpiring in 2033. Any one of the issued U.S. patents may be granted up to five years of patent term extension (up to a maximum patent term of 14 years afterregulatory approval) pursuant to the Hatch-Waxman Act. Whether any of these U.S. patents will be granted patent term extension under the Hatch-WaxmanAct and the length of any such extension cannot be determined until a product covered by such patents receives FDA approval.Under the terms of the Endoceutics License Agreement, we received rights to U.S. patents and applications related to Intrarosa that are controlled byEndoceutics. One issued patent includes drug product claims with a term that expires in 2031. Two additional issued patents include method of use claimsand pharmaceutical dosage form claims with terms that expire in 2028, either of which may be granted up to five years of patent term extension (up to amaximum patent term of 14 years after regulatory approval pursuant to the Hatch-Waxman Act). However, there is no guarantee that the FDA will grant suchan16Table of Contentsextension.Under the Abeona License Agreement, we have exclusive rights to two U.S. patents related to MuGard that are owned by Abeona. These Abeona patentsinclude liquid composition claims and will expire in 2022.Under the terms of the Velo Agreement, we obtained four issued U.S. patents covering methods of using AMAG-423 to treat women exhibiting symptomsof preeclampsia or eclampsia, each of which expires in November 2022, and several corresponding foreign patents that expire in 2023. Digoxin immune fab(ovine), the active ingredient of AMAG-423, has been approved and marketed in the U.S. for many years for a different indication and no longer hascomposition of matter patent protection. Accordingly, we do not have and will not be able to obtain composition of matter patent protection for AMAG-423.AMAG-423 has been granted orphan drug designation by the FDA and, if approved, we expect it to receive seven years of marketing exclusivity.Additionally, under the terms of the Perosphere Agreement, we obtained two issued U.S. patents and several foreign patents related to ciraparantag. OneU.S. patent includes claims directed to the ciraparantag drug composition of matter with a term that expires in 2034, and the other U.S. patent includes claimsdirected to methods of using ciraparantag to reverse the anticoagulation effect of certain coagulation inhibitors with a term that expires in 2032. All of theforeign patents expire in 2032. Either of the issued U.S. patents may be granted up to five years of patent term extension (up to a maximum patent term of 14years after regulatory approval) pursuant to the Hatch-Waxman Act. Whether either of these U.S. patents will be granted patent term extension under theHatch-Waxman Act and the length of any such extension cannot be determined until a product covered by such patents receives FDA approval.With regard to pending patent applications we own or have rights to, even though further patents may be issued on such applications, we cannot be surethat any such patents will be issued on a timely basis, if at all, or with a scope that provides our products with additional protection. The claims of issuedpatents related to any of our products may not provide meaningful protection for the product, and third parties may challenge the validity or scope of anysuch issued patents. Additionally, the claims of our issued patents may be narrowed or invalidated by administrative proceedings, such as interference orderivation, inter partes review, post grant review or reexamination proceedings before the United States Patent and Trademark Office. In addition, existing orfuture patents of third parties may limit our ability to commercialize our products.We also have numerous U.S. and foreign trademark registrations directed to our corporate and affiliate names, as well as our products and complianceprograms. These marks help to further distinguish our products and enhance our overall intellectual property position.CompetitionThe pharmaceutical industry is intensely competitive and subject to rapid technological change. Our existing or potential competitors for all ourproducts have or may develop products that are more widely accepted than ours, are viewed as more safe, effective, convenient or easier to administer, havebeen on the market longer and have stronger patient/provider loyalty, have been approved for a larger patient population, are less expensive or offer moreattractive insurance coverage, discounts, reimbursements, incentives or rebates and may have or receive patent protection that dominates, blocks, makesobsolete or adversely affects our product development or business.FerahemeMany of our competitors for Feraheme are large, well-known pharmaceutical companies and may benefit from significantly greater financial, sales andmarketing capabilities, greater technological or competitive advantages, and other resources.Feraheme currently competes primarily with the following IV iron replacement therapies for the treatment of IDA:•Venofer®, an iron sucrose complex, which is approved for use in hemodialysis, peritoneal dialysis, non-dialysis dependent CKD patients andpediatric CKD patients and is marketed in the U.S. by Fresenius Medical Care North America and American Regent, Inc. (“American Regent”), asubsidiary of Luitpold Pharmaceuticals, Inc. (a business unit of Daiichi Sankyo Group);•Injectafer®, a ferric carboxymaltose injection, which is approved to treat IDA in adult patients who have intolerance to oral iron or have hadunsatisfactory response to oral iron. Injectafer® is also indicated for IDA in adult patients with17Table of Contentsnon-dialysis dependent CKD. Injectafer® is marketed in the U.S. by American Regent, the same distributor of Venofer®;•Ferrlecit®, a sodium ferric gluconate, which is marketed by Sanofi-Aventis U.S. LLC, is approved for use only in hemodialysis patients;•A generic version of Ferrlecit® marketed by Teva Pharmaceuticals, Inc.;•INFeD®, an iron dextran product marketed by Allergan, Inc. which is approved in the U.S. for the treatment of patients with documented irondeficiency in whom oral iron administration is unsatisfactory or impossible; and•Auryxia® (ferric citrate), an oral phosphate binder, which is marketed by Keryx Biopharmaceuticals, Inc. (which recently merged with AkebiaTherapeutics, Inc.), and which approved in the U.S. for the treatment of IDA in adult patients with CKD not on dialysis.In addition to the currently marketed products described above, in the future Feraheme may also compete with Monoferric™ (iron isomaltoside 1000 forinjection) (global brand name Monofer®), which is manufactured by Pharmacosmos A/S in over 30 countries outside the U.S., including Canada.Monoferric™ is under development in the U.S. and has completed its Phase III trials in which Monofer® was administered as a single 1,000 mg dose, which, ifapproved, may offer an alternative for patients. In addition, there are several hypoxia inducible factor stabilizers in various stages of development to treatanemia related to CKD that could potentially compete with Feraheme in the future, a number of which are currently in Phase III trials.We may face challenges retaining our existing Feraheme customers, gaining sales to new customers and gaining market share despite the February 2018approval of Feraheme’s broader label. For example, since Injectafer® was approved in 2013 with a broader indication than the original Feraheme indication,physicians may have increased their use of Injectafer® and other physicians may have begun to use Injectafer®, making it more difficult for us to cause thesephysicians to use Feraheme in the future. In addition, manufacturers of Injectafer® may have entered into commercial contracts with key customers or grouppurchasing organizations (“GPOs”), which would limit our ability to enter into favorable contractual arrangements. Further, Daiichi Sankyo Group has asubstantially larger sales force to market Injectafer® than we do to market Feraheme, which allows them to reach a broader group of healthcare professionals.Companies that manufacture generic products typically invest far fewer resources in research and development than the manufacturers of brandedproducts and can therefore price their products significantly lower than those branded products already on the market. Therefore, competition from generic IViron products could limit our sales. Feraheme may face future competition from generic IV iron replacement therapy products. For example, under oursettlement agreement with Sandoz, if Sandoz receives FDA approval by a certain date, Sandoz may launch its generic version of Feraheme on July 15, 2021,or earlier under certain circumstances customary for settlement agreements of this nature. If Sandoz is unable to secure approval by such date, Sandoz maylaunch an authorized generic version of Feraheme on July 15, 2022 for up to twelve months. Based on sales data provided to us by IQVIA Holdings Inc. (“IQVIA”), we estimate that the size of the total 2018 U.S. non-dialysis IV iron replacementtherapy market was approximately 1.3 million grams, which represents an increase of approximately 8.5% over 2017. During 2017 (and until February 2018),Feraheme competed exclusively in the CKD portion of this market, which we estimate is approximately half of the total market. Based on this IQVIA data, thefollowing represents the 2018 and 2017 U.S. market share allocation of the total non-dialysis IV iron market based on the volume of IV iron administered: 2018 U.S. Non-dialysis IV IronMarket 2017 U.S. Non-dialysis IV IronMarket (1.3 million grams) (1.2 million grams)Venofer®35% 35%Injectafer®33% 26%Feraheme15% 12%INFeD®6% 15%Generic sodium ferric gluconate9% 9%Ferrlecit®2% 3%The market share data listed in the table above is not necessarily indicative of the market shares in dollars due to the variations in selling prices amongthe IV iron products.18Table of ContentsMakenaMakena competition currently comes mainly from generic formulations of HPC injections as well as from pharmacies that compound a non-FDAapproved version of Makena, both of which are sold at a much lower list price than our branded products. In early 2018, Makena’s exclusivity period endedand since then two generic competitors have entered the market in addition to the Makena authorized generic product, marketed by Prasco. Currently,American Regent and Slayback Pharma LLC (“Slayback”) sell generic versions of the Makena 1ml presentation and 5 ml presentations, respectively, and weexpect additional generic entrants to enter the market as early as March 2019 to compete against both the 1ml and 5ml presentations.The long-term success of the Makena franchise is highly dependent on our ability to maintain and grow the market share for the Makena auto-injector,which was approved for commercialization in February 2018, and which is intended to provide us with an alternative treatment method to the Makena IMproduct. Although there is no direct competition with the Makena auto-injector, the auto-injector competes for the same patients as generic versions of theMakena IM product, including the Makena authorized generic. We may not be able to continue to convince healthcare providers to use or to switch fromusing the IM method of administration to the auto-injector, including if healthcare providers are hesitant or apprehensive to use an auto-injector product dueto perceptions regarding lack of improvement in safety, efficacy or pain associated with the Makena auto-injector or if the auto-injector is not pricedcompetitively or is not provided comparable insurance coverage to the Makena IM product.We also expect to continue to face competition for Makena from future generic products as well as products currently in development which offeradditional formulations or routes of administration that doctors believe may reduce or prevent preterm birth, such as an oral HPC product, which is currentlyin development and has completed its End-of-Phase 2 meeting with the FDA.Based on IQVIA data and internal analytics, we estimate that in the fourth quarter of 2018, the Makena branded products and the Makena authorizedgeneric made up approximately 56% and 22% of the total prescriptions written for all FDA-approved HPC products, respectively. We also estimate that thegeneric marketed by American Regent generated approximately 22% of the total prescriptions written for all FDA-approved HPC products in the fourthquarter of 2018. In addition to FDA-approved products for the approved indication, other at-risk patients are treated with compounded formulations of HPCor other therapies, such as vaginal progesterone, that are not approved for women pregnant with a single baby with a prior history of singleton spontaneouspreterm birth.IntrarosaIntrarosa faces competition from the following approved products:•Estrace® Cream (Estradiol vaginal cream, USP 0.01%) (“Estrace”), a vaginal cream for the treatment of VVA marketed by Allergan PLC;•Estradiol® Vaginal Cream USP, 0.01% (generic version of Estrace®), including a generic marketed by Mylan N.V., which was launched in December2017, a generic marketed by Teva Pharmaceuticals USA, Inc., a subsidiary of Teva Pharmaceutical Industries Ltd. (“Teva”), which was launched inearly 2018, a generic marketed by Impax Laboratories, Inc., which was launched in mid-2018, and a generic marketed by Alvogen Inc., which waslaunched in mid-2018;•Vagifem® (estradiol vaginal inserts) (“Vagifem”), a suppository marketed by Novo Nordisk A/S for the treatment of VVA;•Estradiol vaginal inserts USP (generic versions of Vagifem®), including Yuvafem, which is marketed by Amneal Pharmaceuticals LLC, a genericmarketed by Teva and a generic marketed by Glenmark Pharmaceuticals Inc.;•Premarin Vaginal Cream®, a vaginal cream for the treatment of VVA marketed by Pfizer;•Estring®(estradiol vaginal ring), a vaginal ring marketed by Pfizer for the treatment of VVA due to menopause;•Osphena®, an oral therapy marketed by Duchesnay Inc. for the treatment of moderate to severe dyspareunia due to menopause;19Table of Contents•IMVEXXY® (estradiol vaginal inserts), an estrogen indicated for the treatment of moderate to severe dyspareunia due to menopause, which waslaunched in mid-2018 and is marketed by TherapeuticsMD, Inc.; and•Over the counter and compounded remedies that are marketed for dyspareunia and over the counter and compounded products that contain DHEA.The actual market size and market dynamics for moderate to severe dyspareunia due to menopause is uncertain. While we believe that Intrarosa, as theonly FDA-approved, non-estrogen-containing vaginal insert to treat moderate to severe dyspareunia, has competitive advantages compared to estrogen-containing therapies, we may not be able to realize this perceived advantage in the market. Our commercial opportunity could be reduced if physicians orpatients perceive that other products are more effective, or convenient or safer than Intrarosa, or if they are less expensive than Intrarosa.In addition, our ability to compete may be affected by the extent and scope of third-party reimbursement for products treating dyspareunia. Some of theproducts that Intrarosa competes with have a broader indication for VVA and receive reimbursement from governmental healthcare programs. Although wehave been able to gain coverage for Intrarosa with commercial health plans, given the increasing number of generic competitors, payers may choose toselectively implement utilization management policies on Intrarosa. Intrarosa is covered as non-preferred and is one of many drugs available. As a result,patients do not receive full reimbursement by third-party commercial payers and may not receive any reimbursement from governmental healthcare programs.Many patients are therefore subject to substantial out-of-pocket costs.In May 2018, Center for Medicare & Medicaid Services (“CMS”) issued guidelines clarifying the statutory intent of its prior policy to state that drugs forthe treatment of moderate to severe dyspareunia due to menopause are not excluded from Medicare Part D coverage when used consistent with this labeling.Medicare formularies are highly cost sensitive, have long decision cycles, and tend to be limited in the number of products that are offered. Therefore,Medicare coverage for Intrarosa may continue to be limited. Less than full reimbursement by governmental and other third-party payers may adversely affectthe market acceptance of Intrarosa and put it at a competitive disadvantage to some of the competing products, including generic versions of estrogens andcompounded products, which are often priced lower than branded products.MuGardThere are currently few effective treatments for the treatment or management of oral mucositis. The market for treating oral mucositis is driven primarilyby convenience, price and reimbursement and the products in this market remain mostly undifferentiated. There are a number of approaches used to treat ormanage oral mucositis that compete with MuGard, including the use of ice chips during chemotherapy treatments, various medicinal mouthwashes, topicalanesthetics and analgesics, and oral gel treatments. For example, many physicians use what is commonly known as “magic mouthwash”, which may currentlybe the most commonly prescribed medication to manage oral mucositis. Magic mouthwash is a combination of generic ingredients which are typicallycompounded in a pharmacy and is preferred by many physicians because of the availability of less expensive generic ingredients used to formulate themouthwash.VyleesiIf Vyleesi is approved for marketing by the FDA and if we are successful in launching and commercializing it, we expect Vyleesi will face competition.Addyi® (flibanserin) was introduced into the market in October 2015 for the treatment of HSDD in pre-menopausal women and is marketed by Sprout2 Inc.(“Sprout”). Addyi® is only available through a risk evaluation and mitigation strategy (“REMS”) program because of an increased risk of severe hypotensionand syncope due to the interaction between Addyi® and alcohol. In addition, Addyi® was approved with a boxed warning to highlight the risks of severehypotension and syncope in patients who drink alcohol during treatment with Addyi®, in patients who use Addyi® with moderate or strong CYP3A4inhibitors, or in patients who have liver impairment.We are not aware of any company actively developing another melanocortin receptor agonist drug for the treatment of HSDD. However, we are aware ofseveral other drugs at various stages of development, most of which are being developed to be taken on a chronic, typically once-daily, basis. EmotionalBrain BV, a Netherlands company, is developing two different oral fixed-dose, on-demand combination drugs, one a combination of sildenafil (the activeingredient in Viagra) and testosterone and the other a combination of testosterone and buspirone hydrochloride, and has conducted Phase 2b studies. Theremay be other companies developing new drugs for FSD indications, some of which may be in clinical trials in the U.S. or elsewhere, or other companies whichmay sell their products off-label for indications other than FSD.While we believe that Vyleesi will have competitive advantages for treating HSDD, such as on demand use and length of the therapeutic effect comparedto chronic or daily use hormones and other drugs, we may not be able to realize these perceived20Table of Contentsadvantages in the market, in part because Vyleesi is administered by subcutaneous auto-injection. While the single-use, disposable auto-injector format isdesigned to maximize market acceptability, apprehension associated with an injectable drug or certain side effects that were observed in the Phase 3 studies,such as nausea, may impact Vyleesi’s ability to achieve significant market acceptance, especially if an oral therapy is available as an alternative.CiraparantagCurrently, we expect ciraparantag, if approved, will compete primarily with AndexXa® (coagulation factor Xa (recombinant), inactivated-zhzo)(“Andexxa”), which was approved in 2018 for the reversal of Eliquis® and Xarelto® for patients treated with Eliquis® and Xarelto®, when reversal ofanticoagulation is needed due to life-threatening or uncontrolled bleeding. AndexXa® is also in development for the reversal of Savaysa® and Lovenox®. Weare seeking approval of ciraparantag to reverse the effects of Eliquis®, Xarelto®, Savaysa® and Lovenox®. Based on clinical data to date, we expect thatciraparantag will be a ready-to-use product with the potential to be stored at room temperature and to be effective at a fixed dose for the NOACs and LMWHbeing studied.Sales, Marketing and DistributionWomen’s and Maternal Health ProductsFollowing our February 2019 combination of our women's and maternal health sales forces, we will have one integrated sales team, which will nowpromote Intrarosa, Makena and Vyleesi, if approved, in order to provide healthcare professionals with one commercial point of contact and seeks to maximizeefficiency and effectiveness for the promotion of our commercial products. We expect this unified sales force to call on approximately 17,000 obstetriciansand gynecologists and other prescribers.MakenaMakena prescriptions are dispensed via the payer-preferred pharmacy or purchased directly by hospitals, government agencies and integrated deliverynetworks. Our sales and marketing teams use a variety of strategies and focused, multi-channel methods to promote Makena, including dedicating a managedcare team to focus on health plans, including commercial payers, pharmacy benefit managers, and managed Medicaid plans as well as fee-for-serviceMedicaid programs. In addition, we have partnered with a leading provider of home nursing services (which had previously utilized compounded HPC)pursuant to which the provider performs at-home administration of Makena and co-promotes Makena to certain healthcare providers.In addition, we offer customer support through the Makena Care Connection, which is designed to help the prescriber and patient navigate eachindividual patient’s needs throughout the Makena prescription process, including confirming insurance coverage, providing education and support on priorauthorizations (when applicable), and working in collaboration with a payer-preferred pharmacy and home health agency to help ensure timely initiation oftherapy. The Makena Care Connection also screens eligible patients for and enrolls eligible patients in financial assistance programs including (a) our copaysavings program, which helps lower the out-of-pocket cost for commercially insured patients whose plan covers Makena, and (b) our patient assistanceprogram, which provides a full course of therapy at no cost to eligible uninsured and commercially underinsured patients. Additionally, the Makena CareConnection offers education and adherence support to eligible patients to assist with increasing patient compliance by encouraging adherence to the weeklyMakena injection schedule. Prasco has an exclusive license to purchase, distribute and sell the Makena authorized generic and has agreed to use commercially reasonable efforts tomarket, distribute and sell the Makena authorized generic during the term of the agreement. IntrarosaIn July 2017, Intrarosa became available for healthcare provider prescribing and can be ordered through wholesalers and retail pharmacies. As part of ourcontinued launch strategy, and critical to the commercial success of Intrarosa, we are executing an integrated marketing plan designed to drive awareness ofdyspareunia and the potential benefits of Intrarosa to increase the likelihood that healthcare providers and patients will view Intrarosa as an accessible andviable treatment option. Despite significant marketing and educational efforts by industry participants intended to spread awareness of the condition and itstreatment, studies suggest that women often do not recognize dyspareunia, a symptom of VVA, as a treatable medical condition and are often not aware oftreatment options. We have and plan to continue to undertake informational and educational programs such as speaker programs to help spread awareness ofdyspareunia and VVA and the benefits of Intrarosa for the conditions indicated. In addition, we have implemented a sampling program, which makes samplesof Intrarosa available to healthcare providers through our sales representatives or via our website to areas where we do not have sales representatives.21Table of ContentsWe also currently offer a comprehensive copay savings program to patients and have implemented patient-specific marketing programs around the conditionof dyspareunia and Intrarosa utilizing digital marketing, print and social media platforms.VyleesiIf Vyleesi is approved by the FDA, we expect that it will be distributed nationally through select specialty pharmacies. The initial focus of our Vyleesicommercialization efforts will be to continue to raise awareness and education about HSDD for both healthcare professionals and patients with this disorder,such as our 2018 unbranded condition awareness to healthcare professionals. Additionally, our launch strategy will focus on establishing Vyleesi as thepreferred option for women and healthcare providers seeking a treatment for HSDD through media such as direct-to-consumer marketing in lifestyle andsocial media channels. We also intend to focus our Vyleesi marketing efforts, if approved, towards healthcare professionals, who we expect will play asignificant role in increasing HSDD and Vyleesi awareness among their patients, primarily by leveraging our newly combined women’s health sales force andthrough digital media. In order to minimize cost and injection barriers to treatment, we anticipate implementing a competitive copay savings program andinjection training to healthcare professionals upon commercial launch of Vyleesi.Hematology/Oncology ProductsFerahemeWe sell Feraheme to authorized wholesalers and specialty distributors who, in turn, sell Feraheme to healthcare providers who administer Ferahemeprimarily within hospitals and hematology and oncology clinics. Since many hospitals and hematology and oncology practices are members of GPOs, whichleverage the purchasing power of a group of entities to obtain discounts based on the collective bargaining power of the group, we also routinely enter intopricing agreements with GPOs in these markets so the members of the GPOs have access to Feraheme and to the related discounts or rebates.Our sales and marketing organization uses a variety of common pharmaceutical marketing strategies and methods to promote Feraheme, including salescalls to purchasing entities, such as hospitals and hematology and oncology clinics, in addition to individual physicians or other healthcare professionals,medical education symposia, promotional materials, local and national educational programs, and scientific meetings and conferences. In addition, throughAMAG Assist®, we provide customer service and other related programs for Feraheme, including prescription coverage information support services, a patientassistance program for eligible uninsured or functionally under-insured patients and a customer service call center.The label expansion for Feraheme to include all eligible IDA patients in the U.S. doubled the size of the addressable patient population for Feraheme,which has allowed for increased penetration in existing accounts and has broadened the number of customers utilizing Feraheme within the IV ironmarketplace. Additionally, with the expanded label, Feraheme may be promoted as an option for patients who have intolerance to oral iron or haveunsatisfactory response to oral iron therapy that are in treatment settings where we already have sales teams, such as obstetricians and gynecologists inconnection with AUB. We believe this segment of patients is under-diagnosed and under-treated, and there is a significant opportunity in this market toprovide IV iron to such patients. Other categories of potential patients with IDA include those with inflammatory bowel disease treated bygastroenterologists. Our sales teams are working to educate healthcare providers who manage adult IDA patients to expand the IV iron use in physicians’offices, clinics, and hospitals where eligible IDA patients are treated.MuGardOur commercial team uses a variety of common pharmaceutical marketing strategies and methods to promote MuGard, including sales calls to providingentities, such as hematology and oncology clinics and hospitals. In addition, other marketing programs may include promotional materials to individualphysicians or other healthcare professionals.We market and sell MuGard to wholesalers and specialty pharmacies. Patients primarily receive MuGard through specialty pharmacies, which receiveprescriptions from physicians directly or from AMAG Assist, which acts as our MuGard patient reimbursement and support center. We utilize AMAG Assist asa centralized patient intake and referral management center to process insurance coverage issues and administer our patient assistance program. In order tomake MuGard available to patients as soon as possible, we provide a starter kit to clinicians, including a sample bottle and all pertinent information that thepatient or caregiver needs to immediately begin MuGard therapy.22Table of ContentsProduct Supply ChainWe outsource a number of our product supply chain services for our products to third-party logistics providers, including services related to warehousingand inventory management, distribution, chargeback processing, accounts receivable management, sample distribution to our sales force and customerservice call center management.Major CustomersThe following table sets forth customers who represented 10% or more of our total revenues for 2018, 2017 and 2016. Years Ended December 31, 2018 2017 2016AmerisourceBergen Drug Corporation27% 26% 27%McKesson Corporation26% 24% 14%Caremark, LLC< 10% < 10% 10%The loss of the above customers would have a material adverse effect on our business.Government RegulationOverviewOur activities are subject to extensive regulation by numerous governmental authorities in the U.S. The FDC Act and other federal and state statutes andregulations govern, among other things, the research and development, manufacturing, quality control, labeling, recordkeeping, approval, storage,distribution, and advertising, promotion and post-approval monitoring and reporting of pharmaceutical and biological products and medical devices.Failure to comply with any of the applicable U.S. requirements may result in a variety of administrative or judicially imposed sanctions including,among other things, the regulatory agency’s refusal to approve pending applications, suspension, variations or withdrawals of approval, clinical holds,warning letters, product recalls, product seizures, total or partial suspension of operations, injunctions, fines, civil penalties, or criminal prosecution.Product Development and Approval ProcessClinical DevelopmentBefore we may market a new product, we must obtain FDA approval of an NDA for a drug product or a Biologics License Application (“BLA”) for abiologic, such as AMAG-423. The FDA may approve an NDA or BLA if, among other requirements, the safety and efficacy of the drug candidate can beestablished based on the results of preclinical and clinical studies.Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential foradverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations andrequirements, including good laboratory practice regulations.Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators inaccordance with good clinical practices (“GCPs”), which include the requirement that all research subjects provide their informed consent for theirparticipation in any clinical testing. Prior to beginning a clinical trial, an IND - a request for authorization from the FDA to administer an investigational newdrug to humans in clinical trials - must be submitted to FDA and must become effective. A protocol for each clinical trial and any subsequent protocolamendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s institutional reviewboard (“IRB”), before any trials may be initiated, and the IRB must monitor the trial until completed. Additional ongoing regulatory requirements applythroughout the course of a clinical trial, including requirements governing the reporting of certain ongoing clinical trials and clinical trial results to publicregistries.Clinical testing typically proceeds in three phases, which may overlap or be combined. Phase 1 trials seek to collect initial data about safety, tolerability,and optimal dosing of the investigational product in healthy human subjects or, less commonly, in patients with the target disease or condition. The goal ofPhase 2 trials is to provide preliminary evidence about the desired therapeutic efficacy of the investigational product in limited studies with small numbers ofcarefully selected subjects with the target disease or condition. Phase 3 trials generally consist of expanded, large-scale, randomized, double-blind, multi-center23Table of Contentsstudies of the safety and efficacy of the product in the target patient population and are used as the primary basis for regulatory approval.Submission and FDA Review of NDAs, sNDAs and BLAsFollowing the successful completion of clinical trials, the sponsor submits the results to the FDA as part of an NDA or BLA. The NDA or BLA must alsoinclude the results of preclinical tests and studies, as the FDA requires submission of all relevant data available from pertinent nonclinical studies and clinicaltrials, as well as, among other required information, information related to the preparation and manufacturing of the drug or biologic candidate, analyticalmethods, and proposed packaging and labeling. Pursuant to agreements reached during reauthorization of PDUFA, the FDA has a goal of acting on mostoriginal NDAs within six months or ten months of the application submission or filing date (the FDA conducts a preliminary review of all NDAs within thefirst 60 days after submission before accepting them for filing), depending on the nature of the drug. Once the NDA submission has been accepted for filing(60 days post receipt of the application by the FDA, if at all), the FDA typically takes ten months to review the application and respond to the applicant. Thereview process may be extended by FDA requests for additional information or clarification. The FDA may delay or refuse approval of an NDA if applicableregulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety orefficacy of a product.The FDA may also refer the application to an advisory committee for review, evaluation, and recommendation as to whether the application should beapproved. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts. The FDA is not bound by therecommendations of an advisory committee, but it considers such recommendations carefully when making decisions.If the FDA’s evaluations of the NDA or BLA and of the sponsor’s manufacturing facilities are favorable, the FDA will issue an approval letter, and thesponsor may begin marketing the drug for the approved indications, subject to any post-approval requirements, described further below. If the FDAdetermines it cannot approve the NDA or BLA in its current form, it will issue a complete response letter indicating that the application will not be approvedin its current form. The complete response letter usually describes the specific deficiencies that the FDA identified in the application and may requireadditional clinical or other data or impose other conditions that must be met in order to obtain approval of the NDA of BLA. Addressing the deficienciesnoted by the FDA could be impractical, and it is possible that the sponsor could withdraw its application or approval may not be obtained or may be costlyand may result in significant delays prior to approval.Where a sponsor wishes to expand the originally approved prescribing information, such as adding a new indication, it must submit and obtain approvalof an sNDA. Changes to an indication generally require additional clinical studies, which can be time-consuming and require the expenditure of substantialadditional resources. Under PDUFA, the target timeframe for the review of an sNDA to add a new clinical indication is six or ten months from the receipt date,depending on whether or not the sNDA has priority review. As with an NDA or BLA, if the FDA determines that it cannot approve an sNDA in its current form,it will issue a complete response letter as discussed above.Fast Track, Breakthrough Therapy and Priority Review DesignationsThe FDA has a number of programs intended to help expedite testing, review, and approval of drug candidates that meet the applicable eligibility criteriasuch as Fast Track designation, Breakthrough Designation, priority review and accelerated approval. Specifically, new drugs and biological products areeligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medicalneeds for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. For a fasttrack product, the FDA may consider review of completed sections of an NDA or BLA on a rolling basis provided the sponsor provides, and the FDA accepts,a schedule for the submission of the completed sections of the NDA or BLA. However, the FDA’s time period goal for reviewing a fast track application doesnot begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes thatthe designation is no longer supported by data emerging in the clinical trial process.A drug may be eligible for Breakthrough Designation if the drug is intended, either alone or in combination with one or more other products, to treat aserious or life-threatening disease and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existingtherapies. Breakthrough Designation provides for frequent meetings between the sponsor and the FDA, involving senior and experienced review staff, asappropriate, in a collaborative, cross-functional review and the assignment of an FDA project lead to facilitate efficient review of the development programand serve as a scientific liaison with the sponsor.24Table of ContentsA Fast Track or Breakthrough designated drug candidate may also qualify for priority review if it is a product that treats a serious condition and, ifapproved, would provide a significant improvement in safety or effectiveness, under which the FDA reviews the NDA or BLA in a total of six months ratherthan ten months after it is accepted for filing.In addition, under the provisions of the FDA’s Subpart H Accelerated Approval regulations, accelerated approval may be permitted based on anappropriate surrogate endpoint for a new drug that is intended to treat a serious or life-threatening disease or condition and that provides a meaningfultherapeutic benefit over existing treatments.The 21st Century Cures ActThe 21st Century Cures Act, which was signed into law in December 2016, requires the FDA to establish a process for the qualification of drugdevelopment tools that may be used to support or obtain licensure of a biological product or support of the investigational use of a biological product. Adrug development tool includes a biomarker, a clinical outcome assessment, and any other method, material, or measure that the FDA determines aids drugdevelopment and regulatory review. A biomarker is a characteristic, such as a physiologic, pathologic, or anatomic characteristic or measurement, that isobjectively measured and evaluated as an indicator of normal biological processes, pathologic processes, or biological responses to a therapeuticintervention and includes a surrogate endpoint. A clinical outcome assessment is a measurement of a patient’s symptoms, overall mental state, or the effectsof a disease or condition on how the patient functions and includes a patient-reported outcome.The 21st Century Cures Act also requires that, for approval of any BLAs submitted after June 12, 2017, the FDA shall make public a brief statementregarding the patient experience data and related information, if any, submitted and reviewed as part of the application. Patient experience data includes datathat are collected by any persons, including patients, family members and caregivers of patients, patient advocacy organizations, disease researchfoundations, researchers and drug manufacturers, and are intended to provide information about patients’ experiences with a disease or condition, includingthe impact of such disease or condition, or a related therapy, on patients’ lives and patient preferences with respect to treatment of such disease or condition.Abbreviated New Drug ApplicationThe Hatch-Waxman Act created the ANDA pathway, which allows companies to seek approval for generic versions of brand-name drugs previouslyapproved under an NDA and listed in the Orange Book. Rather than directly demonstrating the product’s safety and efficacy, as is required of an NDA, anANDA must show that the proposed generic product is the same as the previously approved product in terms of active ingredient(s), strength, dosage form androute of administration. In addition, with certain exceptions, the generic product must have the same labeling as the product to which it refers. At the sametime, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to thepreviously approved product if, in relevant part, “the rate and extent of absorption of the [generic] drug do not show a significant difference from the rate andextent of absorption of the listed drug.”NDA applicants and holders must provide certain information about patents related to the branded drug for listing in the Orange Book. When an ANDAapplication is submitted, it must contain one of several possible certifications regarding each of the patents listed in the Orange Book for the branded productthat is the reference listed drug. A certification that a listed patent is invalid, unenforceable, or will not be infringed by the sale of the proposed product iscalled a Paragraph IV certification. If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send appropriate notice ofthe Paragraph IV certification to the NDA and patent holders within 20 days of the ANDA or 505(b)(2) application (a marketing application in whichsponsors may rely on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or usefrom the person by or for whom the investigations were conducted) being accepted for filing by the FDA. The NDA and patent holders may then initiate apatent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after thereceipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of expiration of thepatent, a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant, or 30 months after the receipt of the Paragraph IV notice(which can be extended if the reference product has 5-year exclusivity and the ANDA or 505(b)(2) application is submitted between four and five years afterapproval of the reference product).The Hatch-Watchman Act also provides for a 180-day period of generic product exclusivity for the first generic applicant to submit an ANDA with aparagraph IV certification for a generic version of an NDA-approved drug. Generic pharmaceutical products that are introduced by innovator companies,either directly or through partnering arrangements with other generic companies are known as authorized generics. Authorized generics are equivalent to theinnovator companies' brand name drugs but are sold at relatively lower prices than the brand name drugs. An authorized generic product may be marketedduring the25Table of Contents180-day exclusivity period granted to the first manufacturer to submit an ANDA with a Paragraph IV certification for a generic version of the brand product.Adverse Event ReportingThe FDA requires a sponsor to submit reports of certain information on side effects and adverse events associated with its products that occur eitherduring clinical trials or after marketing approval. These requirements include specific and timely notification of certain serious, unexpected and/or frequentadverse events, as well as regular periodic reports summarizing adverse drug experiences. Failure to comply with these FDA safety reporting requirementsmay result in FDA regulatory action that may include civil action or criminal penalties. In addition, as a result of these reports, the FDA could create aTracked Safety Issue for a product in the FDA’s Document Archiving, Reporting and Regulatory Tracking System, place additional limitations on anapproved product’s use, such as through labeling changes, or, potentially, could require withdrawal or suspension of the product from the market. In addition,FDA could require post-approval studies or impose distribution and use restrictions and other requirements via a REMS based upon new safety informationobtained through adverse event reporting (discussed further below).FDA Post-Approval RequirementsEven if initial approval of an NDA, sNDA or BLA is granted, such approval may be subject to post-approval regulatory requirements, any or all of whichmay adversely impact a sponsor’s ability to effectively market and sell the approved product. The FDA may require the sponsor to conduct Phase 4 clinicaltrials, also known as post-marketing requirements, to provide additional information on safety and efficacy. In addition, the FDA and the sponsor may agreeto the conduct of certain post-market studies, known as post-marketing commitments, to further obtain safety and efficacy information. The results of suchpost-marketing requirement or commitment studies may be negative and could lead to limitations on the further marketing of a product, including safetylabeling changes. Also, under PREA, the FDA may require pediatric assessment of certain drugs unless waived or deferred due to the fact that necessarystudies are impossible or highly impractical to conduct in the specified age group or where the drug is not likely to be used in a substantial number ofpediatric patients in that age group. In addition, the FDA may require a sponsor to implement a REMS, which may include distribution or use restrictions tomanage a known or potential serious risk associated with the product. Failure to comply with REMS requirements may result in civil penalties. Further, if anapproved product encounters any safety or efficacy issues, including drug interaction problems, the FDA has broad authority to require the sponsor to takeany number of actions, including, but not limited to, undertaking post-approval clinical studies, implementing labeling changes, adopting a REMS, issuingDear Health Care Provider letters, or removing the product from the market.FDA Regulation of our ProductsFDA Regulation of Product Marketing and PromotionThe FDA also regulates all advertising and promotional activities for prescription drugs, both prior to and after approval. Approved pharmaceuticalproducts must be promoted in a manner consistent with their terms and conditions of approval, including the scope of their approved use. The FDA may takeenforcement action against a company for promoting unapproved uses of a product (“off-label promotion”) or for other violations of its advertising andlabeling laws and regulations. Failure to comply with these requirements could lead to, among other things, adverse publicity, product seizures, civil orcriminal penalties, or regulatory letters, which may include warnings and require corrective advertising or other corrective communications to healthcareprofessionals.Promotional labeling and advertising materials for all prescription pharmaceutical products must be submitted to the FDA’s Office of Promotional DrugProducts (“OPDP”) at the time of initial dissemination or publication. However, under the Subpart H regulations, until the Makena confirmatory post-approval clinical trial is completed, we are subject to the requirement that all Makena promotional materials be submitted for review to the OPDP at least 30days prior to the intended time of initial dissemination of the promotional labeling or initial publication of the advertisement. This extra requirement meansthat there is a longer lead time before we are able to introduce new promotional material to the market for Makena and we are subject to increased scrutinyprior to using promotional pieces to ensure fair balance.FDA Regulation of Manufacturing FacilitiesManufacturing procedures and quality control for approved drugs must conform to cGMP. Domestic manufacturing establishments must follow cGMP atall times, and are subject to periodic inspections by the FDA in order to assess, among other things, cGMP compliance. In addition, prior to approval of anNDA, sNDA or BLA, the FDA will often perform a pre-26Table of Contentsapproval inspection of the sponsor’s manufacturing facility, including its equipment, facilities, laboratories and processes, to determine the facility’scompliance with cGMP and other rules and regulations. Vendors that supply finished products or components to the sponsor that are used to manufacture,package, and label products are subject to similar regulation and periodic inspections. If the FDA identifies deficiencies during an inspection, it may issue aformal notice, which may be followed by a warning letter if observations are not addressed satisfactorily. FDA guidelines specify that a warning letter shouldbe issued for violations of “regulatory significance” for which the failure to adequately and promptly achieve correction may result in agency considerationof an enforcement action.Product approval may be delayed or denied due to cGMP non-compliance or other issues at the sponsor’s manufacturing facilities or contractor sites orsuppliers included in the NDA, sNDA or BLA, and the complete resolution of these inspectional findings may be beyond the sponsor’s control. If the FDAdetermines that the sponsor’s equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of productapproval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against the sponsor, including suspension of its manufacturingoperations.Orphan Drug ExclusivityUnder the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, inpart, as a patient population of fewer than 200,000. The company that first obtains FDA approval for a designated orphan drug for the specified rare disease orcondition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA fromapproving another application for the same drug for the same orphan indication during the exclusivity period, except in very limited circumstances. Adesignated orphan drug may not receive orphan drug exclusivity for an approved indication if that indication is for the treatment of a condition broader thanthat for which it received orphan drug designation. In addition, orphan drug exclusivity marketing rights may be lost if the FDA later determines that therequest for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with therare disease or condition. Finally, the FDA may approve a subsequent drug that is otherwise the same as a currently approved orphan drug for the same orphanindication during the exclusivity period if the sponsor of the subsequent drug can demonstrate that the drug is clinically superior to the already approveddrug. According to the FDA, clinical superiority may be demonstrated by showing that a drug is more effective in a clinical trial, safer in a substantial portionof the target population, or provides a major contribution to patient care relative to the currently approved drug.Fraud and Abuse RegulationOur general operations, and the research, development, manufacture, sale, and marketing of our products, are subject to extensive federal and stateregulation, including, but not limited to, FDA regulations, the Federal Anti-Kickback Statute (“AKS”), the Federal False Claims Act (“FCA”), and the ForeignCorrupt Practices Act (“FCPA”), and their state analogues, and similar laws in countries outside of the U.S., laws governing sampling and distribution ofproducts and government price reporting laws.•The AKS makes it illegal for any person, including a prescription drug or medical device manufacturer, to knowingly and willfully solicit, offer,receive, or pay any remuneration, directly or indirectly, in cash or in kind, in exchange for, or to intended to induce, purchasing, ordering, arrangingfor, or recommending the purchase or order of any item or service, including the purchase or prescription of a particular drug, for which payment maybe made by a federal healthcare program. Liability may be established without proving actual knowledge of the statute or specific intent to violateit. In addition, federal law now provides that the government may assert that a claim including items resulting from a violation of the AKSconstitutes a false or fraudulent claim for purposes of the FCA, described below. Violations of the AKS carry potentially significant civil andcriminal penalties, including imprisonment, fines, administrative civil monetary penalties and exclusion from participation in federal healthcareprograms. Many states have enacted similar anti-kickback laws, including in laws that prohibit paying or receiving remuneration to induce a referralor recommendation of an item or service reimbursed by any payer, including private payers.•The FCA imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers)for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for reimbursement of drugs for payment by afederal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing anobligation to pay money to the federal government. The FCA also prohibits knowingly making, using, or causing to be made or used a false recordor statement material to a false or fraudulent claim or having possession, custody, or control of property or money used, or to be used, by the federalgovernment and knowingly delivering or causing to be delivered, less than all of that money or property. The government may deem manufacturersto have “caused” the submission of false or fraudulent27Table of Contentsclaims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Claims which includeitems resulting from a violation of the federal Anti-Kickback Statute are false or fraudulent claims for purposes of the FCA. The FCA permits aprivate individual acting as a “whistleblower” to bring an action on behalf of the federal government alleging violations of the FCA and to share inany monetary recovery. Government enforcement agencies and private whistleblowers have asserted liability under the FCA for, among other things,claims for items not provided as claimed or for medically unnecessary items, kickbacks, promotion of off-label uses, and misreporting of drug pricesto federal agencies. Many states have enacted similar false claims laws, including in some cases laws that apply where a claim is submitted to anythird-party payer, not just government programs.•The Health Insurance Portability and Accountability Act of 1996, (“HIPAA”) as amended by the Health Information Technology for Economic andClinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which imposes criminal and civil liability for knowinglyand willfully executing a scheme, or attempting to execute a scheme, to defraud any healthcare benefit program, including private payers, orfalsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment forhealthcare benefits, items. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directlyapplicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts toenforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.•The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care andEducation Reconciliation Act of 2010 (the “ACA”), which imposed new annual reporting requirements for certain manufacturers of drugs, devices,biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, for certainpayments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physiciansand their immediate family members. Many states have enacted legislation requiring pharmaceutical companies to, among other things, establishmarketing compliance programs, file periodic reports with the state and make periodic public disclosure on sales and marketing activities andprohibiting certain other sales and marketing practices. If we fail to track and report as required by these laws, we could be subject to state andfederal penalty provisions.•The FCPA prohibits U.S. publicly-traded companies and their intermediaries from making, or offering or promising to make improper payments tonon-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment and requires companies to maintainaccurate books and records, as well as an adequate system of internal accounting controls. If we violate the FCPA, we could be subject to substantialcivil and criminal penalties.Our activities relating to the sale and marketing of our products may be subject to scrutiny under the above referenced laws. Federal and state authoritiescontinue to devote significant attention and resources to enforcement of these laws within the pharmaceutical industry, and private individuals have beenactive in bringing lawsuits on behalf of the government under the FCA. We have developed and implemented a corporate compliance program based on whatwe believe are current best practices in the pharmaceutical industry; however, these laws are broad in scope and there may not be regulations, guidance, orcourt decisions that definitively interpret these laws in the context of particular industry practices. We cannot guarantee that we, our employees, ourconsultants, or our contractors are or will be in compliance will all federal, state, and foreign regulations. If we or our representatives fail to comply with anyof these laws or regulations, a range of fines, penalties, and/or other sanctions could be imposed on us, including, but not limited to, restrictions on how wemarket and sell our products, significant fines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or othersanctions. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure ofsignificant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition and results of operations.Such investigations or suits may also result in related shareholder lawsuits, which can also have an adverse effect on our business.Our activities are also subject to regulation by numerous regulatory authorities including CMS, other divisions of the Department of Health and HumanServices, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission (the“FTC”), the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.28Table of ContentsOther Regulatory RequirementsSeveral states have enacted legislation requiring manufacturers operating within the state to establish marketing and promotional compliance programsor codes of conduct and/or file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials and otheractivities. In addition, as discussed above, as part of the ACA, certain manufacturers of drugs and medical devices are required to publicly report gifts andother payments or transfers of value made to U.S. physicians and teaching hospitals. Several states have also adopted laws that prohibit certain marketing-related activities, including the provision of gifts, meals or other items to certain healthcare providers. Many of these requirements are new and uncertain, andthe likely extent of future enforcement for failure to comply with these requirements is unclear. Compliance with these laws is difficult, time-consuming, andcostly, and if we are found not to be in full compliance with these laws, we may face enforcement actions, fines, and other penalties, and we could receiveadverse publicity which could have an adverse effect on our business, financial condition, and results of operations.We are also subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). The legislative andregulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In theU.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal andstate consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. For example, in June2018, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which will come into effect on January 1, 2020 andprovides new data privacy rights for consumers and new operational requirements for companies, which may increase our compliance costs and potentialliability. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal informationsharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as aprivate right of action for data breaches that is expected to increase data breach litigation. The CCPA could mark the beginning of a trend toward morestringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.In addition, as discussed above, in the course of our business, we may obtain health information from third parties (i.e., healthcare providers whoprescribe our products) that are subject to privacy and security requirements under HIPAA. HIPAA imposes, among other things, specified requirements oncovered entities and their business associates relating to the privacy and security of individually identifiable health information including mandatorycontractual terms and required implementation of technical safeguards of such information. Although we are not directly subject to HIPAA (other thanpotentially with respect to providing certain employee benefits) we could be subject to criminal penalties if we knowingly obtain or disclose individuallyidentifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA/HITECH. We are alsosubject to laws and regulations covering data privacy and the protection of health-related and other personal information. We obtain patient healthinformation from most healthcare providers who prescribe our products and research institutions we collaborate with, and they are subject to privacy andsecurity requirements that may affect us.Outside the U.S., we are impacted by the privacy and data security requirements at the international, national and regional level, and on an industryspecific basis. Legal requirements in the countries in which we do business relating to the collection, storage, handling and transfer of personal data andpotentially intellectual property continue to evolve with increasingly strict enforcement regimes. More privacy and security laws and regulations are beingadopted, and more are being enforced, with potential for significant financial penalties. In the E.U., the General Data Protection Regulation (“GDPR”) tookeffect in May 2018 and imposes increasingly stringent data protection and privacy rules. The GDPR extends the geographical scope of EU data protectionlaw to non-EU entities under certain conditions, tightens existing EU data protection principles and creates new obligations for companies and new rights forindividuals. The GDPR is new and therefore guidance, interpretation and enforcement under the GDPR are still developing. The GDPR may increase ourresponsibility and potential liability in relation to personal data that we process, expose us to substantial potential fines and increase our compliancecosts. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensiveand time-consuming to defend and could result in adverse publicity that could harm our business.Failure to comply with data protection laws and regulations could result in government enforcement actions (which could include civil or criminalpenalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.29Table of ContentsU. S. Healthcare ReformOur revenue and operations could be affected by changes in healthcare spending and policy in the U.S. We operate in a highly regulated industry andnew laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to health care availability, the method ofdelivery or payment for health care products could negatively impact our business, operations and financial condition. The U.S. Congress and statelegislatures from time to time propose and adopt initiatives aimed at cost containment, which could impact our ability to sell our products profitably. Forexample, the ACA substantially changed the way healthcare is financed by both governmental and private insurers. Since its enactment, however, there havebeen modifications and challenges to numerous aspects of the ACA. In 2019, litigation, regulation, and legislation related to the ACA are likely to continue,with unpredictable and uncertain results. The full impact of the ACA, any law repealing. replacing, and/or modifying elements of it, and the politicaluncertainty surrounding any repeal or replacement legislation on our business remains unclear.Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which hasresulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review therelationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, theU.S. government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth ofgovernment paid healthcare costs. Individual states in the U.S. have passed legislation and implemented regulations requiring reporting related tonotification of certain price increases and submissions on justifications for certain price increases. The enforcement of individual state requirements isuncertain, but failure to comply could expose us to substantial financial penalties and the potential for adverse publicity. The number of states establishingrequirements to report pricing or otherwise designed to control pharmaceutical and biological product pricing, including price or patient reimbursementconstraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed toencourage importation from other countries and bulk purchasing is likely to continue to increase, creating a regulatory landscape of substantial complexity.The pace of change and varying demand of individual state requirements may make it very difficult to comply.Drug-Device Combination RegulationCombination products are defined by the FDA to include products composed of two or more regulated components (e.g., a drug and a device). Drugs anddevices each have their own regulatory requirements, and combination products may have additional requirements. The Makena auto-injector and theVyleesi product, if approved, are considered drug-device combination products and are regulated under this framework.Medical Device RegulationAll clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE, regulations that amongother things, govern investigational device labeling, prohibit promotion of the investigational device, and specify recordkeeping, reporting and monitoringresponsibilities of study sponsors and study investigators. The IDE application must become effective prior to commencing human clinical trials. The IDEwill automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the company that the investigation ison hold and may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE that requires modification, the FDA may permit aclinical trial to proceed under a conditional approval.Medical devices, such as MuGard, are similarly subject to FDA clearance or approval and extensive post-approval regulation under the FDC Act.Authorization to commercially distribute a new medical device in the U.S. is generally received in one of two ways. The first, known as premarketnotification (the “510(k) process”), requires a sponsor to obtain 510(k) clearance by demonstrating that the new medical device is substantially equivalent toa legally marketed medical device that is not subject to premarket approval. The second, more rigorous process, known as premarket approval, requires asponsor to independently demonstrate that the new medical device is safe and effective.Both before and after a device is commercially released, there are ongoing responsibilities under FDA regulations. For example, the FDA requires thatdevice manufacturers maintain particular reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports ofadverse experiences and other information to identify potential problems with marketed medical devices. If the FDA were to conclude that we are not incompliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could,depending on the FDA’s specific findings, require us to notify healthcare professionals and others that the devices present unreasonable risks30Table of Contentsof substantial harm to the public health, order a recall, repair, replacement, or refund of such devices, detain or seize adulterated or misbranded medicaldevices, or ban such medical devices. The FDA may also impose operating restrictions, enjoin and/or restrain certain conduct resulting in violations ofapplicable law pertaining to medical devices and assess civil or criminal penalties against our officers, employees, or us.Pharmaceutical Pricing and ReimbursementOur ability to successfully commercialize our products is dependent, in significant part, on the extent to which coverage and reimbursement for theseproducts and related treatments is available from third-party payers, including state and federal governmental payers, such as Medicare and Medicaid,managed care organizations, private health insurers and other organizations.Coverage by third-party payers depends on a number of factors, including the third-party’s determination that the product is clinically and cost effectiveboth individually and within its therapeutic class. Third-party payers are increasingly challenging the prices charged for pharmaceutical products (includingcombination products), and continue to institute cost containment measures to control or influence the purchase of pharmaceutical products, such as throughthe use of prior authorizations and step therapy. There is a continued scrutiny, intensifying criticism and political focus on pharmaceutical pricing practicesat both national and regional levels. Especially in the U.S., state legislators are implementing a variety of regulations intended to increase the transparency ofbio-pharmaceutical pricing, which may lead to future price control regulations at state levels. Federally, multiple price control mechanisms have beensuggested in the recent past, and bi-partisan focus on the issues remains a high priority. Consolidation of pharmacy benefit managers and managed careorganizations is also increasing the price pressure in the private sector. If these third-party payers provide an insufficient level of coverage and reimbursementfor our products, physicians and other healthcare providers may choose to prescribe alternative products, including generics, which would have an adverseeffect on our ability to generate revenues.Medicaid is a joint federal and state health insurance program that is administered by the states for low-income children, families, pregnant women, andother individuals with disabilities. Under the Medicaid Drug Rebate program established by the ACA, we are required to pay a rebate to each state Medicaidprogram for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program. The amount of the rebate isdetermined by law and will be adjusted upward if average manufacture price (“AMP”) increases more than inflation as measured by the Consumer Price Index- Urban. Each quarter, the rebate amount is calculated based on our report of current AMP and best price for each of our products to CMS. The requirementsfor calculating AMP and best price are complex. We are required to report revisions to AMP or best price previously reported within a certain period, whichrevisions could affect our rebate liability for prior quarters. Further, changes to the Medicaid Drug Rebate Program, effective as of April 2016, require stateMedicaid programs to reimburse certain brand name covered outpatient drugs at actual acquisition cost plus a dispensing fee. If we fail to provideinformation timely or we are found to have knowingly submitted false information to the government, the statute governing the Medicaid Drug Rebateprogram provides for civil monetary penalties.Medicare is a federal health insurance program, administered by CMS, for people who are 65 or older, and certain people with disabilities or certainconditions, irrespective of their age. Medicare Part B covers (a) products administered by physicians or other healthcare practitioners, (b) products providedin connection with certain durable medical equipment, (c) certain oral anti-cancer and immunosuppressive drugs. We are required to provide average salesprice (“ASP”) information to CMS on a quarterly basis. The submitted information is used to calculate a Medicare payment rate using ASP plus a specifiedpercentage. These rates are adjusted periodically. If we fail to provide information timely or we are found to have knowingly submitted false information tothe government, the governing statutes provide for civil monetary penalties.Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e. drugs that do not need to be injected or otherwiseadministered by a physician), including combination products. Medicare Part D is a voluntary prescription drug benefit, administered by private prescriptiondrug plan sponsors approved by the U.S. government. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs; and eachdrug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time to time. Theprescription drug plans negotiate pricing with the manufacturers and may condition formulary placement on the availability of manufacturer discounts.Manufacturers, including us, are required to provide a 50% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when thosebeneficiaries reach the coverage gap in their drug benefits.Effective January 2018, CMS adopted a policy to pay for separately payable, non-pass-through drugs and biologicals other than vaccines purchasedthrough the 340B Drug Pricing Program under the Public Health Services Act (the “340B Program”), with certain exceptions, at the ASP minus 22.5% ratherthan ASP plus 6%. Drugs not purchased under the 340B Program will31Table of Contentscontinue to be paid for at a rate of ASP plus 6%. There has been significant increases in budget pressure, which may adversely impact premium priced agents,such as Feraheme and Makena.Our products are available for purchase by authorized users of the Federal Supply Schedule (“FSS”), pursuant to a contract with the Department ofVeterans Affairs (“VA”), in which we are required to offer deeply discounted pricing to four federal agencies: VA; Department of Defense (“DOD”); the CoastGuard; and Public Health Services (“PHS”) (including the Indian Health Service) (together the “Big Four”). Coverage under Medicaid, Medicare and the PHSpharmaceutical pricing program is conditioned upon FSS participation. FSS pricing is not to exceed the price we charge our most-favored non-federalcustomer for a product. In addition, prices for drugs purchased by the Big Four (including products purchased by military personnel and dependents throughthe TRICARE retail pharmacy program), are subject to a cap on pricing equal to 76% of the non-federal average manufacturer price (non-FAMP). Anadditional discount applies if the non-FAMP increases more than inflation, as measured by the Consumer Price Index - Urban. If we fail to provideinformation timely or we are found to have knowingly submitted false information, the governing statute provides for civil monetary penalties.Federal law requires that any company participating in the Medicaid Drug Rebate program also participate in the PHS’s 340B Program in order forfederal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B Program requires participating manufacturers toagree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340Bcovered entities include a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals thatserve a disproportionate share of low-income patients. The 340B ceiling price is calculated using a statutory formula, which is based on AMP and rebateamount for the covered outpatient drug as calculated under the Medicaid Drug Rebate program. In addition, we may, but are not required to, offer thesecovered entities a price lower than the 340B ceiling price. The ACA also obligates the Health Resources and Services Administration (the “HRSA”), theagency which administers the 340B Program, to promulgate various regulations and implement processes to improve the integrity of the 340B Program.Federal, state and local governments continue to consider legislation to limit the growth of healthcare costs, including the cost of prescription drugs andcombination products. In 2017, we saw several states and local government either implement or consider implementing price transparency legislation thatmay prevent or limit our ability to take price increases at certain rates or frequencies. For example, in 2017, California enacted a new law, that went into effecton January 1, 2018 with initial reporting requirements in effect as of January 1, 2019, to facilitate greater transparency in brand-name and generic drugpricing through the implementation of specific price reporting requirements for pharmaceutical manufacturers. The extent and timing of these changes are notknown, but future legislation could limit the price and/or payment for prescription drugs. If adequate reimbursement levels are not maintained by governmentand other third-party payers for our products, our ability to sell our products may be limited and/or our ability to establish acceptable pricing levels may beimpaired, thereby reducing anticipated revenues and profitability.Success of any products we may ultimately seek approval to commercialize outside of the U.S. will depend largely on obtaining and maintaininggovernmental coverage, as governmental healthcare programs tend to be the dominant third party payers. Products that are not covered and funded bygovernment entities are unlikely to be used in these markets. We cannot be certain we can obtain coverage and reimbursement for our product in marketsoutside the U.S. Additionally, ability to market our products on a profitable basis may be limited, given governments control prices of prescription medicinesthough mechanisms such as, but not limited to, international price referencing, therapeutic price reference, price cuts, rebates, revenue related taxes, andprofit controls. In markets outside the U.S., the price of the prescriptions medicines tend to decline over the life of the medicine and/or as the volumeincreases, making it difficult to achieve expected growth in revenue.BacklogWe had a $9.1 million and $7.6 million sales backlog as of December 31, 2018 and 2017, respectively. We expect to recognize the $9.1 million in thefirst quarter of 2019, net of any applicable rebates or credits. These backlogs were largely due to timing of orders received from our third-party logisticsproviders. Generally, product orders from our customers are fulfilled within a relatively short time of receipt of a customer order.32Table of ContentsEmployeesAs of February 25, 2019, we had 467 employees. This number reflects the impact of approximately110 employees who were displaced in our recentlycompleted restructuring effort, which combined our women’s health and maternal health sales forces into one integrated sales team. We utilize consultantsand independent contractors on a regular basis to assist in the development and commercialization of our products. Our success depends to a significantextent on our ability to continue to attract, retain and motivate qualified sales, technical operations, managerial, scientific and medical personnel of alllevels. Although we believe we have been relatively successful to date in obtaining and retaining such personnel, we may not be successful in the future.None of our employees are represented by a labor union, and we consider our relationship with our employees to be good.Foreign OperationsWe have no foreign operations. We did not have material revenues from customers outside of the U.S. in 2018 and 2017.Code of EthicsOur Board of Directors has adopted a code of ethics that applies to our officers, directors and employees. We have posted the text of our code of ethics onour website at http://www.amagpharma.com in the “Investors” section. We will provide to any person without charge a copy of such code of ethics, uponrequest in writing to Investor Relations, AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. In addition, should any changes be made toour code of ethics, we intend to disclose within four business days on our website (or in any other medium required by law or the NASDAQ): (a) the date andnature of any amendment to our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer orcontroller, or persons performing similar functions and (b) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that isgranted to one of these specified officers, the name of such person who is granted the waiver, and the date of the waiver.Available InformationWe are subject to the information and reporting requirements of the Securities Exchange Act of 1934, under which we file periodic reports, proxy andinformation statements and other information with the U.S. Securities and Exchange Commission (the “SEC”). Copies of these reports may be examined bythe public without charge on the Internet at http://www. sec.gov. Our internet website address is http://www.amagpharma.com. Through our website, we makeavailable, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and registration statements,and all of our insider Section 16 reports (and any amendments to such filings), as soon as reasonably practicable after such material is electronically filedwith, or furnished to, the SEC. These SEC reports can be accessed through the “Investors” section of our website. The information found on our website is notpart of this or any other report we file with, or furnish to, the SEC. Paper copies of our SEC reports are available free of charge upon request in writing toInvestor Relations, AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. The content on any website referred to in this Form 10-K is notincorporated by reference into this Form 10-K unless expressly noted.33Table of ContentsITEM 1A. RISK FACTORS:The following information sets forth material risks and uncertainties that may affect our business, including our future financial and operationalresults and could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report onForm 10-K and elsewhere as discussed in the introduction to Part I above. You should carefully consider the risks described below, in addition to the otherinformation in this Annual Report on Form 10-K, before making an investment decision. The risks and uncertainties described below are not the only oneswe face. Additional risks not presently known to us or other factors not perceived by us to present material risks to our business at this time also may impairour business operations.Risks Related to Our Business and IndustryOur ability to successfully commercialize our products or product candidates, if approved, including our ability to achieve their widespread marketacceptance, is critical to the success of our business.We dedicate a substantial amount of our resources to the commercialization of our products and in preparation for the commercialization of our productcandidates, including Vyleesi, which is in development for the treatment of hypoactive sexual desire disorder (“HSDD”). Our ability to generate revenue inthe near-term will depend almost entirely on our ability to execute on our commercialization plans and the level of market adoption for, and the continueduse of, our products (and, if approved, our product candidates) by physicians, hospitals, patients, and/or healthcare payers, including government payers,consumers, managed care organizations, and retail and specialty pharmacies. If we are not successful in commercializing our products, including achievingand maintaining an adequate level of market adoption, our profitability and our future business prospects will be adversely impacted.The degree of commercial success and market acceptance of our products and product candidates will depend on a number of factors, including, but notlimited to, the following:•The competitive landscape for our products, including the timing of new competing products (including generics) entering the market, and the leveland speed at which competing products (current or new) experience market acceptance;•The effectiveness of our marketing, sales and distribution strategies and operations and our ability to leverage our established relationships in themedical community and expand our access through contracting strategies;•Actual or perceived advantages or disadvantages of our products or product candidates as compared to alternative treatments, including theirrespective safety and efficacy profiles, the potential convenience and ease of administration or cost effectiveness;•The size of the patient population for our products and our ability to retain or grow our customer base and maintain and efficiently deploy our salesforce and commercialization team to compete in the market, especially given the diverse nature of our product portfolio;•Our ability to supply sufficient inventory of our products for commercial sale, including maintaining commercially viable manufacturing processesthat are compliant with applicable laws and regulations (including current good manufacturing practices (“cGMP”));•The success and timing of regulatory approval and launch for our product candidates, including our ability to obtain regulatory approval for Vyleesiin the U.S. and whether the U.S. Food and Drug Administration (the “FDA”) imposes any restrictions on its use or distribution;•Our ability to engage with and educate healthcare providers and patients to increase awareness and understanding of the underlying disease statesthat our products treat or the value of the underlying purpose of our products, including moderate to severe dyspareunia and HSDD;•New safety or drug interaction issues that could arise as our products are used or studied over longer periods of time or used by a wider group ofpatients, some of whom may be taking other medicines or have additional underlying health problems;34Table of Contents•Current and future restrictions or limitations on our approved or future indications and patient populations or other adverse regulatory actions; •The relative price, constraints on pricing and the impact of price increases on our products, including the financial impact of certain programs wemay implement such as the Intrarosa comprehensive copay savings program and sample program;•Our ability to secure and maintain adequate reimbursement from government and third-party payers to optimize patient access and the willingnessand ability of patients to pay for our products, including the willingness of healthcare providers to prescribe our products if more economicaloptions are available;•The performance of our manufacturers, license partners, distributors, providers and other business partners, over which we have limited control;•Our ability to maintain compliance with all applicable FDA regulations;•Any significant misestimations of the size of the market and market potential for any of our products or product candidates; and•Our and our partners’ ability to enforce intellectual property rights in and to our products to prohibit a third-party from marketing a competingproduct (including a generic product) and our ability to avoid third-party patent interference or intellectual property infringement claims. We have limited experience with development stage products and cannot ensure that we will be successful in gaining approval of our product candidates,including Vyleesi, AMAG-423 and ciraparantag, on a timely basis, or at all, and even if approved, we may not be successful in commercializing suchproducts. Additionally, any approvals that we do obtain may contain unexpected FDA-imposed restrictions on the use or distribution of such products,which could adversely and materially affect our long term success.Our long-term success and revenue growth depends upon our ability to continue to successfully develop new products. Drug development is inherentlyrisky, time consuming and unpredictable. The FDA imposes substantial requirements on the development of such candidates to become eligible formarketing approval and has substantial discretion in the approval process.We currently have three product candidates in our pipeline. Vyleesi, an investigational product designed to be an on demand therapy for the treatment ofHSDD in pre-menopausal women, for which we were granted a Prescription Drug User Fee Act (“PDUFA”) date by the FDA of June 23, 2019. In addition,during 2018 and early 2019, we acquired two development-stage products, AMAG-423, which is in development for the treatment of severe preeclampsia,and ciraparantag, which is in development for patients treated with novel oral anticoagulants or low molecular weight heparin when reversal of theanticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding.The approval of our current or future product candidates for commercial sale in the U.S. could be delayed, limited or denied or we may be required toconduct additional studies for a number of reasons, including, but not limited to, that:•The FDA may determine that our product candidates do not demonstrate safety and efficacy in accordance with regulatory agency standards basedon a number of considerations, including adverse medical events that are reported during the trials, such as increases in blood pressure and a seriousadverse event of hepatitis of unknown etiology noted in prior Vyleesi clinical trials;•The FDA could analyze and/or interpret data from clinical trials and preclinical testing in different ways than we or our partners interpret them anddetermine that our data is insufficient for approval;•The FDA may require more information, including additional preclinical or clinical data or trials, to support approval, such as the recent request bythe FDA for additional data assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi;35Table of Contents•Devices we may use in combination with our products may not be adequate or may not be considered adequate by the FDA, such as the auto-injectordevice that we plan to use to administer Vyleesi and the coagulometer we intend to use in the Phase 3 clinical program for ciraparantag;•The FDA could determine that our manufacturing processes are not properly designed, are not conducted in accordance with federal laws orotherwise not properly managed and we may be unable to establish, and obtain FDA approval for, a commercially viable manufacturing process forour product candidates in a timely manner, or at all;•The supply or quality of our product candidates for our clinical trials may be insufficient, inadequate or delayed, particularly with respect to AMAG-423, which is a biologic and involves a time intensive, complex manufacturing process;•The size of the patient population required to establish the efficacy of our product candidates to the satisfaction of the FDA may be larger than weanticipated;•The failure of clinical investigational sites and the records kept at such sites, including the clinical trial data, to be in compliance with the FDA’scurrent good clinical practices regulations (“cGCP”), including the failure to pass FDA inspections of clinical trial sites;•The FDA may change their approval policies or adopt new regulations;•The FDA may not be able to undertake reviews or approval processes in a timely fashion, including as a result of government shutdowns, which havebecome more frequent and lengthy in recent administrations;•The results of the earlier clinical trials may not be representative of our future, larger trials, particularly since the presumed mechanism of action forcertain of our products is not known or understood; for instance ciraparantag has only been studied in a small number of healthy volunteers;•The FDA may not agree with our regulatory approval strategies or components of our regulatory filings, such as the design or implementation of ourclinical trials; for instance, we are relying on precedent to estimate the number of patients required in our Phase 3b ciraparantag trial prior to filingthe New Drug Application (“NDA”) and the FDA may not agree with our approach and our other expectations for these clinical trials may notultimately be approved by the FDA; or•A product may not be approved for the indications that we request.Further, we have identified the following risks, which are specific to a particular development program:Vyleesi•The FDA may determine that the magnitude of efficacy demonstrated in the Vyleesi studies does not amount to a clinically meaningful benefitto pre-menopausal women with HSDD and thus may not approve Vyleesi despite statistically significant efficacy results; and•Although we believe that the frequent dosing study for Vyleesi can be conducted and with data submitted prior to the June 23, 2019 VyleesiPDUFA date, if we are not able to submit the results of this study on time or if the study results are unacceptable to the FDA, the FDA mayrequest additional studies and/or we may receive a Complete Response letter to our NDA submission for Vyleesi.AMAG-423•AMAG-423 is produced through a time intensive, complex process and there is currently only one third-party that can manufacture it, as furtherdiscussed below;•The Phase 2b/3a trial may produce negative or inconclusive results or may not demonstrate to the FDA’s satisfaction that AMAG-423 is safe andeffective, particularly in light of the limited amount of data to date demonstrating that AMAG-423 effectively treats severe preeclampsia in thispatient population;36Table of Contents•Patient enrollment may be slower than expected as severe preeclampsia can be a difficult patient population to enroll and enrollment of thestudy to date has been very slow. For example, although we are in the process of expanding the trial sites to accelerate enrollment, enrollmentmay be slower for any number of factors, including failure of our third-party vendors (including our CROs) to effectively perform theirobligations to us in a timely manner, a lack of patients who meet the enrollment criteria, our inability to establish sufficient trial sites, includingoutside of the U.S., in a timely manner, or our inability to secure sufficient supply of drug product to meet the accelerated clinical timeline;•Under our agreement with BTG plc, we are required to differentiate our product from their product DigiFab® including without limitation, vialabeling, dosage and/or formulation and if we are unable to show differentiation, we may be in breach of the agreement and be subject topenalties; and•There is no FDA-approved treatment for severe preeclampsia and accordingly, there is not an established regulatory pathway, which may requireus to conduct additional trials or otherwise delay the approval of AMAG-423. Ciraparantag•Since the coagulometer that we intend to use in the ciraparantag Phase 3a trials has not yet been fully validated or tested on a large scale, theFDA may (i) determine that the device is not effective in measuring whole blood clotting time, and/or (ii) not grant the Investigational DeviceException, which is necessary prior to the use of the coagulometer in our clinical trials; in such circumstances, ciraparantag may not receiveregulatory approval or its approval would be delayed. Moreover, the FDA may only approve ciraparantag in conjunction with the use of thecoagulometer (i.e. as a companion diagnostic), which would affect the commercial viability of ciraparantag. In addition, AMAG-423 has received orphan drug designation from the FDA and we expect to request orphan drug designation for ciraparantag. Underthe Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, defined, inpart, as a patient population of fewer than 200,000. The company that first obtains FDA approval for a designated orphan drug for the specified rare disease orcondition receives orphan drug marketing exclusivity for that drug for a period of seven years. We cannot guarantee that our clinical data or otherinformation that we generate or submit will be adequate for AMAG-423 or ciraparantag to receive orphan drug exclusivity. Even after an orphan drug isapproved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or isclinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, orphan drug exclusivity marketingrights may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficientquantity of the drug to meet the needs of patients with the rare disease or condition. If we do not receive orphan drug designation, or if the FDA approvesanother drug for the same indication, we may have limited market exclusivity for our products. Any failure, delay or setback in obtaining regulatory approval for our product candidates could adversely affect our ability to grow our business andleverage our product portfolio and the future prospects of our business could be materially adversely affected. In addition, share prices have declinedsignificantly in certain instances where companies have failed to obtain FDA approval of a product or where the timing of FDA approval is delayed. If we arerequired to conduct additional studies, our share price could decline significantly. Further, the market for products that address unmet medical needs ishighly speculative and if we have over-estimated the market opportunity for any of our products or product candidates, or if we are unsuccessful in gainingmarket share, then our business and results of operations could be materially and adversely affected.Even if regulatory approval is granted by the FDA to market our current or future product candidates, the FDA may impose limitations on the indicateduse for which the drug product may be marketed or require additional post-approval clinical trials or other requirements with which we would need to complyin order to maintain approval of these products. The occurrence of any of these scenarios could materially harm the commercial prospects of our productcandidates and our business could be seriously harmed. For additional post-approval risks see Risk Factor below entitled “We are subject to ongoingregulatory obligations and oversight of our products, and any failure by us to maintain compliance with applicable regulations may result in severaladverse consequences including the suspension of the manufacturing, marketing and sale of our respective products, the incurrence of significantadditional expense and other limitations on our ability to commercialize our respective products.”37Table of ContentsClinical product development involves a lengthy and expensive process, with uncertain timelines and outcomes. Any failure or delay in our clinicaldevelopment programs could severely harm our business.Clinical testing is expensive, difficult to design and implement, can take multiple years to complete and is inherently uncertain as to the ultimatetimelines and outcomes. The results of preclinical testing or human clinical studies may not be predictive of the results of later-stage clinical trials and failurecan occur at any stage of the clinical development process. We are currently conducting a Phase 2b/3a multi-center, randomized, double-blind, placebo-controlled, parallel group study for AMAG-423, for which we are targeting to complete enrollment by the end of 2019. We are also in the process ofcompleting a Phase 2a study for ciraparantag and expect to initiate our Phase 3 clinical development program in the second half of 2019. We may experiencedelays in these ongoing studies or any future clinical studies we or our partners conduct.Clinical trials can be delayed, suspended or terminated for a variety of reasons, including, but not limited to, the following:•Delay or failure to reach agreement with the FDA on a trial design, particularly with product candidates, such as AMAG-423, where there is nocurrent FDA-approved treatment and the endpoints in our ongoing Phase 2b/3a trial have not been used in prior studies;•Delay or failure to reach agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites, failure bysuch CROs and trial sites to comply with regulatory requirements or study protocols, or clinical trial sites dropping out of the trial;•Our inability to manufacture, or obtain from third parties, adequate supply of drug product and substance sufficient to complete our clinical studies;•Delay or failure in obtaining the necessary approvals from regulators or institutional review boards (“IRBs”), including comparable foreignreviewing entities, in order to commence a clinical trial at a prospective trial site, or their suspension or termination of a clinical trial oncecommenced;•Imposition of a clinical hold for safety reasons or following an inspection of our or our partners’ clinical trial operations or trial sites by the FDA orother regulatory authorities;•Slower than expected rate of patient enrollment or difficulty maintaining patients who have initiated participation in a clinical trial or for any post-treatment follow-up;•Problems with drug product or drug substance storage and distribution;•Difficultly adding new clinical trial sites on a timely basis, or at all:•Governmental or regulatory delays and changes in regulatory requirements, policy and guidelines, including guidelines specifically addressingrequirements for the development of treatments for our product candidates;•Ambiguous or negative interim results, or results that are inconsistent with earlier results or that indicate unforeseen safety or efficacy issues; and•Feedback from the FDA, an IRB or other entity that requires modification of the study protocol.If we or our partners terminate or experience delays in the completion of any of our ongoing or future clinical trials, our development costs may increase,our regulatory approval process could be delayed and our ability to commercialize and commence sales of our product candidates may be harmed, whichcould have a material adverse effect on our business. Our inability to successfully complete clinical studies or trials of our product candidates anddemonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our businessprospects, financial condition and results of operations. In addition, many of the reasons that cause or lead to a delay in the commencement or completion ofour clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.38Table of ContentsOur revenues for the Makena franchise may continue to be negatively impacted by recent and future generic entries into the market and the supplydisruption of certain of our Makena products.Our ability to continue to successfully commercialize Makena is dependent upon a number of factors, including our ability to differentiate Makena fromother treatment options, especially now that two independent generic competitors have entered the market. Although our partner, Prasco, LLC (“Prasco”)markets a generic version of Makena in the U.S. (“the Makena authorized generic”) to mitigate the decrease in Makena revenue as generic entrants gainmarket share, our Makena products will continue to experience pricing and supply chain pressure and as a result, our Makena revenues may fall belowexpectations which could cause our financial condition and results of operations to be adversely impacted.The long-term success of the Makena franchise is highly dependent on our ability to successfully commercialize the pre-filled subcutaneous auto-injector (the “Makena auto-injector”), which was approved for commercialization in February 2018, and which provides us with an alternative treatmentmethod to the intramuscular (“IM”) formulation of Makena (the “Makena IM product”). Although there is no direct competition with the Makena auto-injector, the auto-injector competes for the same patients as generic versions of the Makena IM product, including Makena authorized generic. We may notbe able to convince patients or healthcare providers to use or to switch from using the IM method of administration to the auto-injector, including if patientsor healthcare providers are hesitant or apprehensive to use an auto-injector product due to perceptions regarding safety, efficacy or pain associated with theMakena auto-injector, or if the auto-injector is not priced competitively or is not provided comparable insurance coverage.In addition, we have lost and could lose additional market share if we continue to not be able to deliver sufficient quantities of Makena inventory tomeet demand. Due to continued manufacturing issues at our primary third-party manufacturer, we are currently experiencing a supply disruption of ourMakena IM products, which has resulted in both our single-dose and multi-dose branded Makena vials being out-of-stock as well as periodic disruptions toour authorized generic supply. Although we are attempting to mitigate this supply issue by manufacturing at our secondary supplier, we can make noguarantees that additional supply will be available in a timely manner and we anticipate that our revenues for the IM products could continue to be adverselyimpacted. We are currently working with the FDA, healthcare providers, distribution partners and our manufacturers to minimize the impact of the currentsupply disruption of the IM products, including by encouraging healthcare providers to support new patient starts on the auto-injector. However, due toincreased demand of the auto-injector product, we could face supply issues for that product as well. These supply issues have caused and will continue tocause a disruption in our ability to meet commercial demand of Makena more generally, which has and could continue to negatively impact revenues.Further, we rely on Prasco for our successful commercialization of the Makena authorized generic. We have limited experience working with a genericvendor and selling products under terms customary in the generic marketplace. We are responsible for supplying product to Prasco, and due to the problemswith our supply chain, revenues with respect to the Makena authorized generic have been and could continue to be adversely affected and we could besubject to certain charges, which could be substantial. For example, we were required to reimburse Prasco for certain charges it incurred in 2018 due to ourinability to supply them with sufficient product to meet their contractual obligations with customers.If we and Prasco are not able to capture or maintain sufficient market share, if generics are sold at a significant discount to Makena’s price, if we continueto experience supply disruptions related to our Makena IM products or if we become unable to meet commercial demand for our Makena auto-injector orMakena authorized generic, our Makena revenues could be materially and adversely affected and, ultimately, could negatively impact our stock price andresults of operations.We are completely dependent on third parties to manufacture our products and any difficulties, disruptions, delays or unexpected costs, or the need to findalternative sources, could adversely affect our profitability and future business prospects.We do not own or operate facilities for the manufacture of our commercially distributed products. We rely solely on third-party contract manufacturingorganizations (“CMOs”) and our licensors (who, in turn, may also rely on CMOs) to manufacture our products for our commercial and clinical use. We or ourlicensors may not be able to enter into agreements with manufacturers or second source manufacturers whose facilities and procedures comply with cGMPregulations and other regulatory requirements on a timely basis and with terms that are favorable to us, if at all. Further, our ability to have our productsmanufactured in sufficient quantities and at acceptable costs to meet our commercial demand and clinical development needs is dependent on theuninterrupted and efficient operation of our CMO’s and our licensors’ manufacturing facilities. For example, as discussed above, Pfizer, our primary drugproduct manufacturer of the Makena IM Products, is experiencing manufacturing issues and as a result, we have been and may be unable to meet the demandfor both our branded Makena products and the Makena authorized generic. We currently remain out-of-stock of our branded single dose and multi dose vialsof Makena product. Any further or other difficulties, disruptions, or delays in the manufacturing process or supply chain could39Table of Contentsresult in product defects, shipment delays, suspension of manufacturing of, sale of or clinical development for the product, recall or withdrawal of productpreviously shipped for commercial or clinical purposes, inventory write-offs, additional supply failure charges to Prasco, or the inability to meet commercialor clinical demand in a timely and cost-effective manner.In some cases we rely on single source manufacturers without a qualified alternative manufacturer. For example, we only have one manufacturing sourcefor Vyleesi. Securing additional third-party contract manufacturers will require significant time for validating the necessary manufacturing processes, gainingregulatory approval, and implementing the appropriate oversight and may increase the risk of certain problems, including cost overruns, processreproducibility, stability issues, the inability to deliver required quantities of product that conform to specifications in a timely manner, or the inability tomanufacture our products in accordance with cGMP. Furthermore, none of our or our licensors’ current third-party drug product manufacturers licenses to usexclusively and as such they may exhaust some or all of their resources meeting the demand of other parties or themselves.Additionally, in early 2018 we received approval for the Makena auto-injector and may encounter difficulties in the production of the Makena auto-injector, including problems involving quality control, assurance and product reliability. For instance, we have received certain complaints regarding auto-injector malfunction. These issues as well as potential issues regarding scale-up, yields, and manufacturing costs, could result in significant delays inproduction or our inability to meet our demand for the auto-injector product. In addition, we do not currently have back-up suppliers for the Makena auto-injector manufacturers. Establishing an alternative or replacement supplier for the auto-injector device is a long and costly process and may not be successful.While we take precautions to mitigate potential interruptions, any failure at our manufacturers could result in a shortage of our Makena auto-injectorinventory.Further, we are dependent upon Endoceutics, Inc. (“Endoceutics”) to manufacture commercial supply of Intrarosa, who in turn relies on a single CMO forsuch supply. Endoceutics has limited experience overseeing CMOs for products at commercial scale, which imposes significant and complex regulatory andcompliance obligations. Endoceutics has and may continue to face challenges and difficulties with its CMO in satisfying such obligations, particularly sincesuch CMO has limited experience manufacturing prescription drugs.AMAG-423 is a polyclonal antibody that is produced through a time intensive, complex process in which immunogens consisting of an analog ofdigoxin medication are produced in a laboratory and used to immunize sheep, which sheep then produce certain antibodies. These antibodies are collected,separated, purified, and formulated into digoxin immune fab (ovine). As discussed above, there is only one third-party that can manufacture AMAG-423 andwhich utilizes its own flock of sheep located entirely in Australia for the production of the antibodies used to produce AMAG-423. We currently have acommercial supply agreement to manufacture AMAG-423 drug substance and since there would only be one source of supply, if there are any disruptions toany part of the supply chain process, including the ability to obtain the ovum serum and other raw materials or any issues with the sheep used to produce theantibodies, such as diseases or natural disasters, our ability to complete the Phase 2b/3a trial or commercialize AMAG-423, if approved, would be adverselyaffected.We currently do not have a commercial drug product supply agreement to manufacture ciraparantag and may not be able to enter into such agreement onacceptable terms, if at all. In addition, even if we enter into such agreement, since there would only be one source of supply, if there are any disruptions to anypart of the supply chain process, including the ability to obtain certain raw materials, our ability to complete our planned clinical trials or commercializeciraparantag, if approved, would be adversely affected.Further, we, our licensors and our respective CMOs currently purchase certain raw and other materials used to manufacture our products from third-partysuppliers. At present, we do not have long-term supply contracts with most of these third parties. These third-party suppliers may cease to produce the raw orother materials used in our products or as part of the administration of our products or otherwise fail to supply these materials to us, our licensors or ourrespective third-party manufacturers, or fail to supply sufficient quantities of these materials or supply materials that do not conform to specifications to us,our licensors or our respective third-party manufacturers in a timely manner for a number of reasons, including, but not limited to, the following:•Adverse financial developments at or affecting the supplier;•Unexpected demand for or shortage of raw or other materials;•Regulatory requirements or action;•An inability to provide timely scheduling and/or sufficient capacity;•Manufacturing difficulties;40Table of Contents•Changes to the specifications of the materials such that they no longer meet our standards;•Lack of sufficient quantities or profit on the production of materials to interest suppliers;•Labor disputes or shortages;•Failure to comply with environmental regulations, such as rules and regulations relating to the handling, storage and discharge of hazardous waste;•Changes in material hazard classification, which could require changes to our manufacturing processes, which, in turn, could require regulatoryapproval;•Disruption due to natural disasters; or•Import or export problems.In addition, we, our licensors or our respective third-party manufacturers sometimes obtain raw or other materials from one vendor only, even wheremultiple sources are available, to maintain quality control and enhance working relationships with suppliers, which could make us susceptible to priceinflation by the sole supplier, thereby increasing our production costs. As a result of the high-quality standards imposed on our raw or other materials, we, ourlicensors or our respective third-party manufacturers may not be able to obtain such materials of the quality required to manufacture our products from analternative source on commercially reasonable terms, or in a timely manner, if at all.If, because of the factors discussed above, we are unable to have our products manufactured on a timely or sufficient basis, we may not be able to meetcommercial demand or our clinical development needs for our products or product candidates or we may not be able to manufacture our products in a cost-effective manner. As a result, we may lose sales, fail to generate projected revenues or suffer development or regulatory setbacks, any of which could have anadverse impact on our profitability and future business prospects.Competition in the pharmaceutical and biopharmaceutical industries, including from companies marketing generic products, is intense. If we fail tocompete effectively, our business and market position will suffer.The pharmaceutical industry is intensely competitive and subject to rapid technological change. Our existing or potential competitors have or maydevelop products that are more widely accepted than ours, are viewed as more safe, effective, convenient or easier to administer, have been on the marketlonger and have stronger patient/provider loyalty, have been approved for a larger patient population, are less expensive or offer more attractive insurancecoverage, discounts, reimbursements, incentives or rebates and may have or receive patent protection that dominates, blocks, makes obsolete or adverselyaffects our product development or business. Any such advantages enjoyed by our competitors could reduce our revenues and the value of ourcommercialization and product development efforts.Makena competition currently comes mainly from two independent generic formulations of hydroxyprogesterone caproate (“HPC”) injections, whichwere approved in 2018, as well as from pharmacies that compound a non-FDA approved version of Makena, all of which are sold at much lower list pricesthan our branded products. We also expect to continue to face competition for Makena from future generic products as well as products currently indevelopment which offer additional formulations or routes of administration that doctors believe may reduce or prevent preterm birth, such as an oral HPCproduct, which is currently in development and has completed its End-of-Phase 2 meeting with the FDA.Many of our competitors for Feraheme and Intrarosa are large, well-known pharmaceutical companies and may benefit from significantly greaterfinancial, sales and marketing capabilities, greater technological or competitive advantages, and other resources. Feraheme competes primarily withInjectafer®, a ferric carboxymaltose injection, Venofer®, an iron sucrose complex, and INFeD®, an iron dextran product and there are a number of oral ironreplacement therapies either approved, such as Auryxia® (ferric citrate), an oral phosphate binder, or in development, such as Monofer® (iron isomaltoside),and hypoxia inducible factor stabilizers.Intrarosa faces competition primarily from (a) Estrace® Cream (Estradiol vaginal cream, USP 0.01%), a vaginal cream for the treatment of vulvar andvaginal atrophy (“VVA”), (b) Vagifem® (estradiol vaginal inserts), a suppository for the treatment of VVA, (c) Premarin Vaginal Cream®, a vaginal cream forthe treatment of VVA, (d) IMVEXXY® (estradiol vaginal inserts), an estrogen indicated for the treatment of moderate to severe dyspareunia due tomenopause, (e) Estring®(estradiol vaginal ring), a41Table of Contentsvaginal ring marketed by Pfizer for the treatment of VVA due to menopause, (f) Osphena®, an oral therapy marketed by Duchesnay Inc. for the treatment ofmoderate to severe dyspareunia due to menopause, and (g) generic versions of certain of these products and over the counter and compounded remedies totreat VVA and dyspareunia.We also expect to face competition for Vyleesi, if approved, including from Addyi®, an FDA-approved product for treatment of HSDD in pre-menopausalwomen as a daily-use oral drug. In addition, we are aware of several other drugs at various stages of development, most of which are being developed to betaken on a chronic, typically once-daily, basis. Emotional Brain BV, a Netherlands company, is developing two different oral fixed-dose, on-demandcombination drugs, one a combination of sildenafil (the active ingredient in Viagra) and testosterone and the other a combination of testosterone andbuspirone hydrochloride, and has conducted Phase 2b studies. There may be other companies developing new drugs for female sexual dysfunction (“FSD”)indications, some of which may be in clinical trials in the U.S. or elsewhere, or other companies which may sell their products off-label for indications otherthan FSD.Currently, the primary pharmaceutical competitor we expect ciraparantag, if approved, to compete with is AndexXa® (coagulation factorXa (recombinant), inactivated-zhzo) (“Andexxa”), which was approved in 2018 for the reversal of Xarelto®(rivaroxaban) and Eliquis®(apixaban), whenreversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. AndexXa® is also in development for the reversal ofSavaysa®(edoxaban) and Lovenox® (enoxaparin sodium injection). If we are unable to compete effectively against existing and future competitors, our business, financial condition and results of operations may bematerially adversely affected. For further details on our competition, please see Item I, “Business - Competition.”The success of our products depends on our ability to maintain the proprietary nature of our technology.We rely on a combination of patents, trademarks and trade secrets in the conduct of our business. The patent positions of pharmaceutical andbiopharmaceutical firms are generally uncertain and involve complex legal and factual questions. We may not be successful or timely in obtaining anypatents for which we submit applications or the breadth of the claims obtained in our patents may not provide sufficient protection for our technology. Thedegree of protection afforded by patents for proprietary or licensed technologies or for future discoveries may not be adequate to preserve our ability toprotect or commercially exploit those technologies or discoveries or to prevent others from doing so. The issuance of a patent is not conclusive as to itsscope, validity or enforceability, and our owned or licensed patents may be challenged in the courts or patent offices in the U.S. or abroad. Such challengesmay result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others fromusing or commercializing similar or identical technologies and products, or limit the duration of the patent protection of our technology and products. Inaddition, our owned or licensed intellectual property might be subject to liens or encumbrances, which, as a result, may not provide us with sufficient rightsto exclude others from developing and commercializing products similar or identical to ours. Therefore, the degree of protection afforded by our intellectualproperty may provide us with little or no competitive advantage. For example, digoxin immune fab (ovine), the active ingredient of AMAG-423, has beenapproved and marketed in the U.S. for many years for a different indication and accordingly, no longer has composition of matter patent protection. Ifpossible, we plan to seek additional patent protection for AMAG-423 through patent applications; however, we may not be able to obtain additional patentprotection that would provide us with a competitive advantage.We currently hold a number of U.S. and foreign patents for our development and commercial products, including the following:•One U.S. patent related to Feraheme that will expire in June 2023 and other U.S. patents related to Feraheme that expire in 2020; •One U.S. patent related to the Makena auto-injector product that will expire in 2036;•Four U.S. patents related to AMAG-423 that will expire in 2022, and several foreign patents that will expire in 2023; and•Two U.S. patents related to ciraparantag that expire in 2032 and 2034, and several foreign patents that will expire in 2032.We also rely on licensed patents for the protection of the products we are developing and commercializing. Under our current license agreements wehave rights to a number of U.S. and foreign patents and applications, including the following:42Table of Contents•U.S. and foreign patents and applications licensed from Palatin Technologies, Inc. (“Palatin”) related to Vyleesi that expire in 2020 and 2033 (one ofwhich may be extended by up to five years under the Hatch-Waxman Act in the U.S);•U.S. patents licensed from Endoceutics related to Intrarosa that expire in 2028 and 2031 (one of which may be extended by up to five years underthe Hatch-Waxman Act);•U.S. patents licensed from Antares Pharma, Inc. related to the Makena auto-injector product that expire between 2019 and 2034; and•U.S. patents licensed from Abeona Therapeutics, Inc. related to MuGard that expire in 2022.These and any other patents owned by or licensed to us may be contested in litigation or reexamined or reviewed by the United States Patent andTrademark Office (the “USPTO”). Even if we come to a mutually acceptable settlement arrangement with an adverse party, we or they may become subject toincreased regulatory scrutiny or be subject to formal or informal requests or investigations, including by the FDA, the Department of Justice or the FederalTrade Commission. If any present or future patents relied on for the development or commercialization of our products are narrowed, invalidated or heldunenforceable, this could have an adverse effect on our business and financial results.In addition, although we believe that the patents related to each of our products or product candidates were rightfully issued and the respective portfoliosgive us sufficient freedom to operate, a third-party could assert that the development, manufacture or commercialization of any of our products or productcandidates infringes its patents or other proprietary rights, potentially resulting in harm to our business and financial results. Further, the intellectual propertyrights that we own or license might be subject to liens or other encumbrances. If we are required to defend against such claims or to protect our own or ourlicensed proprietary rights against others, it could result in substantial financial and business costs as well as the distraction of our management. An adverseruling in any litigation or administrative proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, result inmonetary damages, injunctive relief or otherwise harm our competitive position, including by limiting our marketing and selling activities, increasing therisk for generic competition, limiting our development and commercialization activities or requiring us to obtain licenses to use the relevant technology(which licenses may not be available on commercially reasonable terms, if at all).There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical andbiotechnology industries. We may become a party to intellectual property litigation or administrative proceedings, including interference or derivation, interpartes review, post grant review or reexamination proceedings before the USPTO. In addition, generic entrants could file an Abbreviated New DrugApplication (“ANDA”) to seek approval of a generic form of one or more of our products. If an ANDA filer is ultimately successful in patent litigation againstus, meets the requirements for a generic version of our branded product to the satisfaction of the FDA under its ANDA, and is able to supply the product insignificant commercial quantities, the generic company could introduce a generic version to the market. For example, pursuant to a settlement agreemententered into with Sandoz in March 2018, Sandoz could introduce a generic version of ferumoxytol to the market earlier than the expiration of our patents.Such a market entry would likely limit our Feraheme sales, which would have an adverse impact on our business and results of operations. Further, we mayface similar suits in the future, including for our other products, which will be expensive and will consume considerable time and other resources, whichcould materially and adversely impact our business, especially if we have to divert resources from our commercialization or business development efforts.We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintainour competitive position, which we seek to protect, in part, by confidentiality agreements with our corporate licensees, collaborators, contract manufacturers,employees and consultants. However, these agreements may be breached and we may not have adequate remedies for any such breaches, and our trade secretsand other confidential information might become known. In addition, we cannot be certain that others will not independently develop substantiallyequivalent or superseding proprietary technology, or that an equivalent product will not be marketed in competition with our products, thereby substantiallyreducing the value of our proprietary rights.We depend, to a significant degree, on the availability and extent of reimbursement from third-party payers for the use of our products, and a reduction inthe availability or extent of reimbursement, especially in light of generic competition, could adversely affect our revenues and results of operations.Our ability to successfully commercialize our products is dependent, in significant part, on the availability and level of coverage and reimbursementfrom third-party payers, including governmental payers, private health insurers and other43Table of Contentsorganizations. Coverage by third-party payers depends on a number of factors, including the third-party’s determination a products’ clinical and costeffectiveness, both individually and within their therapeutic class.There is a continued scrutiny, intensifying criticism and political focus on pharmaceutical pricing practices at both national and regional levels. U.S.state legislators are implementing a variety of regulations intended to increase the transparency of pharmaceutical pricing, which may lead to future pricecontrol regulations at state levels. Federally, multiple price control mechanisms have been suggested in the recent past, and bi-partisan focus on the issuesremains a high priority. Consolidation of pharmacy benefit managers and managed care organizations is also increasing the price pressure in the privatesector. Certain specialty pharmaceuticals, pharmaceutical companies and pricing strategies have been the subject of increased scrutiny and criticism bypoliticians and the media, which could also increase pricing pressure throughout the industry, or lead to new legislation that may limit our pricing flexibilityor subject us to criticism and reputational harm in response to any price increases. Congress and the current presidential administration have each indicatedthat they will continue to pursue new legislative and/or administrative measures to control drug costs. The current presidential administration released a“Blueprint,” which contains certain measures that the U.S. Department of Health and Human Services is already working to implement, focusing in part onthe cost of drugs. For example, on October 25, 2018, the Centers for Medicare & Medicaid Services (“CMS”) issued an Advanced Notice of ProposedRulemaking (“ANPRM”), indicating it is considering issuing a proposed rule in the spring of 2019 on a model called the International Pricing Index. Thismodel would utilize a basket of other countries’ prices as a reference for the Medicare program to use in reimbursing for drugs covered under Part B. TheANPRM also included an updated version of the Competitive Acquisition Program as an alternative to current “buy and bill” payment methods for Part Bdrugs. If third-party payers provide an insufficient level of coverage and reimbursement for our products, physicians and other healthcare providers maychoose to prescribe alternative products, including generics, which would have an adverse effect on our ability to generate revenues.In addition, federal budgetary concerns could result in the implementation of significant federal spending cuts or regulatory changes, including cuts inMedicare and other health-related spending in the near-term or changes to the Patient Protection and Affordable Care Act, as amended by the Health Care andEducation Reconciliation Act of 2010 (collectively, the “ACA”). For example, the Bipartisan Budget Act of 2018, among other things, amends the ACA,effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”, which will shift cost for namebrand drugs away from Part D participants back to the manufacturers, which could have a negative effect on our profits. Further, on June 14, 2018 the U.S.Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12.0 billion in ACA risk corridor payments tothird-party payors. These efforts could mean that third party payors will not have the levels of funding historically available for coverage and reimbursementof our products, and the effects and risks to our business are not yet fully known. Further, the reimbursement and health care regulatory landscape havecontinued to evolve rapidly over recent months, including as a result of recent court decisions, making the healthcare landscape (and its impact on third-party payors, providers and our business, and on the viability of the ACA itself) unpredictable. In 2019, litigation, regulation, and legislation related to theACA are likely to continue, with unpredictable and uncertain results. The extent, timing and details of the changes are not currently known, but the federallyfunded healthcare landscape could face significant changes during the current presidential administration, including in the near-term, and could impact stateand local healthcare programs, including Medicaid and Medicare, which could also have a negative impact on our future operating results. The magnitude ofthe impact of these laws and developments on our business is uncertain. Medicare payment policy, in time, can also influence pricing and reimbursement inthe non-Medicare markets, as private third-party payers and state Medicaid plans frequently adopt Medicare principles in setting reimbursementmethodologies. These and any future changes in government regulation or private third-party payers’ reimbursement policies may reduce the extent ofreimbursement for our products and adversely affect our future operating results.The introduction of generic competition in a therapeutic category where our products are used may also affect the reimbursement policies of governmentauthorities and third-party payers. Many generic first regulations, as well as policies and practices promoting use of low cost alternatives, can placesignificant downward pressure on the use of our branded products. Additionally, clinical and cost effectiveness reviews of previously established coveragedecisions post generic entry, may further limit coverage and the amount of reimbursement for branded medications when there is a generic available.Reimbursement levels or the lack of reimbursement may impact the demand for, or the price of, our branded products. In the U.S, continued increase inpatient cost sharing, in the form of higher deductibles, copay and coinsurance levels, have led to patients being burdened with substantial out-of-pocketcosts. New measures such as copay aggregators where the manufacturer’s payment assistance, such as copay and insurance cards, no longer count toward apatient’s deductible or out-of-pocket maximum, limit the overall benefit a manufacture can offer the patient. If reimbursement is not available or is availableonly at limited levels, we may not be able to successfully commercialize our products, and/or our financial results from the sale of related products could benegatively and materially impacted.44Table of ContentsIntrarosa is dependent on third-party reimbursement to reach its market potential. Payers frequently employ a tiered system in reimbursing end-users forpharmaceutical products, with tier designation affecting copay or deductible amounts. While some of the products that Intrarosa competes with receivereimbursement from governmental healthcare programs, Intrarosa is generally classified as a Tier 3 drug, and therefore patients are unlikely to receive fullreimbursement by third-party commercial payers and may not receive any reimbursement from governmental healthcare programs. As a result, patients maybe subject to substantial copays or deductible requirements. Less than full reimbursement by governmental and other third-party payers may adversely affectthe market acceptance of Intrarosa and put it at a competitive disadvantage to some of the competing products, including generic versions, which are oftenpriced lower than brand name products. In addition, given the increasing number of generic competitors entering the VVA and dyspareunia market, payersmay choose to implement step edits or prior authorizations prior to Intrarosa use, which could adversely impact our Intrarosa revenues and profitability. IfIntrarosa does not receive adequate reimbursement coverage, the growth in Intrarosa sales may not meet our expectations or receive more favorable third-party reimbursement than its competitors, and our business, financial condition and results of operations may be materially adversely affected.There is also significant uncertainty concerning the extent and scope of third-party reimbursement for products treating HSDD. Because Addyi® iscurrently the only FDA-approved therapy to treat HSDD, there is little precedent on which to base expectations as to third-party reimbursement opportunitiesfor Vyleesi, if approved. We believe reimbursement for Vyleesi and other products for the treatment of HSDD will be similar to approved products treatingerectile dysfunction and products treating women’s health conditions. If this is the case, we expect that commercial payers will likely cover Vyleesi as a non-preferred product, which normally requires a higher copay or deductible than preferred drugs. As a result, patients would be unlikely to receive fullreimbursement by third-party commercial payers and may not receive any reimbursement from governmental healthcare programs. Therefore, patients may besubject to substantial copays or deductible requirements. Less than full reimbursement by governmental and other third-party payers may adversely affect themarket acceptance of Vyleesi. If Vyleesi does not receive adequate reimbursement coverage, our business, financial condition and results of operations maybe materially adversely affected. Further, the market for products for the treatment of HSDD may be particularly vulnerable to unfavorable economicconditions and demand for Vyleesi may be tied to discretionary spending levels of the targeted patient population. Thus, any downturn in the economycould result in weakened demand for Vyleesi.We may not be able to further expand our portfolio by entering into additional business development transactions, such as in-licensing arrangements,acquisitions, or collaborations or, if such arrangements are entered into, we may not realize the anticipated benefits and they could disrupt our business,decrease our profitability, result in dilution to our stockholders or cause us to incur significant additional debt or expense.As part of our business strategy to expand our portfolio, we are seeking to in-license or acquire additional pharmaceutical products or companies thatleverage our corporate infrastructure and commercial expertise, such as our recent acquisitions of AMAG-423 and Perosphere and our license agreements withPalatin and Endoceutics. There are limited opportunities available that align with our business strategy and there can be no assurance that we will be able toidentify or complete any additional transactions in a timely manner, on a cost-effective basis, or at all, or that such transactions will be successfully integratedinto our business.Further, the valuation methods that we use for any acquired or licensed product or business require significant judgment and assumptions. Actual resultsand performance of the products or businesses that we may acquire, including anticipated synergies, regulatory outcomes, economies of scale and otherfinancial benefits, could differ significantly from our original assumptions, especially during the periods immediately following the closing of thetransaction. For example, if the timing of FDA approval for our product candidates, the market for our product candidates or the cost of goods for our productcandidates is different from what we predicted in our models, we may not achieve the anticipated financial benefits from our investment in our developmentproducts. In addition, acquisitions may cause significant changes to our current organization and operations, may subject us to more rigid or constrainingregulations or government oversight and may have negative tax and accounting consequences. These results could have a negative impact on our financialposition or results of operations and result in significant charges in future periods.In addition, proposing, negotiating and implementing collaborations, in-licensing arrangements or acquisition agreements is a lengthy, complex, time-consuming and expensive process and such transactions are often subject to increasing regulatory oversight. Other companies, including those withsubstantially greater financial, marketing and sales resources, may compete with us for these arrangements, and we may not be able to enter into sucharrangements on acceptable terms or at all. Further, any such strategic transactions by us could result in write-offs or impairments, which may be larger thananticipated or impact our financial statements more quickly than anticipated. Such transactions may also require us to incur additional and significant debtand contingent liabilities, or we may become liable under the target’s contracts, any of which may contain restrictive45Table of Contentscovenants or burdensome obligations that could adversely impact or limit our ability to grow our business, enter into new agreements, undertake ourcommercialization and development initiatives and adversely affect our operating results.In addition, our cash and investments may not be sufficient to finance any additional strategic transactions, and we may choose to issue shares of ourcommon or preferred stock as consideration. Alternatively, it may be necessary for us to raise additional funds through public or private financings, and suchadditional funds may not be available on terms that are favorable to us, if at all. If we are unable to successfully obtain rights to suitable products or if anyacquisition or in-license arrangement we make is not successful, our business, financial condition and prospects for growth could suffer. Further, any equityor equity-linked issuance, whether as consideration for a strategic transaction or in a financing transaction, could cause our stockholders to experiencesignificant dilution.Even if we do acquire or license additional products or businesses, the management of a license arrangement, collaboration, or other strategicarrangement and/or integration of an acquired asset or company may disrupt our ongoing business and require management resources that otherwise wouldbe available for ongoing commercialization efforts and development of our existing enterprise. The integration of the operations of such acquired products orbusinesses requires significant efforts, including the coordination of information technologies, sales and marketing, operations, manufacturing, safety andpharmacovigilance, medical, finance and business systems and processes. These efforts result in additional expenses and involve significant amounts ofmanagement’s time. Our future success will significantly depend upon our ability to manage our expanded enterprise and various-staged products, which willpose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increasedcosts and complexity.If we cannot successfully integrate businesses or products we may acquire or in-license into our company, we may experience material negativeconsequences to our business, financial condition or results of operations. For example, different skills and training are required for the promotion of varioustherapeutic products. Our revenues and profitability could suffer if we do not successfully expand our sales and commercial expertise into new areas, such asHSDD, preeclampsia and anticoagulant reversal products and our sales force is unable to successfully promote a portfolio of products.Failure to obtain or maintain regulatory approval in international jurisdictions or to establish a commercialization organization, , or partner with a thirdparty, could prevent us from marketing certain of our products abroad and could limit the growth of our business.We may attempt to market certain of our existing and future products, product candidates or certain indications outside of the U.S. In order to market ourproducts in the European Union (“EU”) and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with numerous andvarying regulatory requirements. Approval by the FDA does not ensure approval by foreign regulatory authorities and the approval procedures in foreignjurisdictions can vary widely and can involve additional clinical trials and data review beyond that required by the FDA. In addition, we have limitedexperience in preparing, filing and executing the applications necessary to gain foreign regulatory approvals or commercializing products outside of the U.S.and may need to rely on third-parties, including potential collaborators, to assist us with these processes. We may not be able to enter into agreements withthird-parties on acceptable terms, if at all. If we pursue regulatory approval outside of the U.S., we may not obtain approval on a timely basis, or at all, andtherefore we may be unable to successfully commercialize our products internationally. Additionally, even if we obtain regulatory approval, we will need toestablish a commercial organization, or partner with a third party, to commercialize our products in other territories. If we are unable to successfully establisha commercialization infrastructure or enter into an agreement with a third-party on acceptable terms, or at all, the growth of our business would be limited.We have significantly expanded the size of our product portfolio and we may experience difficulties in managing this or future expansion.In recent years, we have considerably expanded our product portfolio with the addition of AMAG-423 and ciraparantag and by obtaining certaindevelopment and commercialization rights to Vyleesi and Intrarosa. Management, personnel, systems and facilities that we currently have in place may notbe adequate to support this recent growth, and we may not be able to retain or recruit qualified personnel in the future in this competitive environment toadequately support our organization and diversified portfolio. To manage this and any future growth effectively, we will be required to continue to managethe sales and marketing efforts for our existing products and the development of our product candidates while continuing to identify and acquire attractiveadditions to our portfolio, develop our oversight and collaboration efforts for our licensed products, including development-staged products, enhance ouroperational, financial and management controls, reporting systems and procedures, maintain benefit plans, and establish and increase our access tocommercial supplies of our products, which will be challenging and for which we might not be successful. We will be required to expand and maintain ourfacilities and equipment and manage our internal development efforts effectively while complying with our contractual obligations to licensors, licensees,46Table of Contentscontractors, collaborators, distributors and other third parties. In addition, management may have to divert a disproportionate amount of its attention awayfrom day-to-day activities and towards managing these growth activities, which could be disruptive to our business. Our future financial performance and ourability to execute on our business plan will depend, in part, on our ability to effectively manage our recent and future growth. For example, although webelieve the recent combination of our women’s and maternal health sales forces will allow us to maximize the efficiency and effectiveness of our commercialorganization to promote our products, the resulting reduction of our workforce needed to restructure our commercial organization may not yield theanticipated improvements in our ability to successfully commercialize our products. If we experience difficulties or are unsuccessful in managing ourexpanded portfolio including the impacts of our restructured commercial organization, our results of operations and business prospects will be negativelyimpacted.Further, if we add additional products to our portfolio through licenses or acquisitions, we may face legal, regulatory, and compliance scrutiny orincreased expenses as a result of the target’s or licensor’s pre-acquisition or pre-license business practices, including if such targets or licensors were allegedto have violated any privacy, data security, or other healthcare compliance laws, or failed to comply with all applicable FDA laws and requirements,regardless of whether such allegations have merit. Our recourse for such risks may be limited depending upon the remedies we are able to negotiate in therelevant transaction agreements. If any issues arise, we may not be entitled to sufficient, or any, indemnification or recourse from the licensor or the acquiredcompany, which could have a materially adverse impact on our business and results of operations.An adverse determination in any current or future lawsuits in which we are a defendant could have a material adverse effect on us.The administration of our products to, or the use of our products by, humans may expose us to liability claims, whether or not our products are actually atfault for causing any harm or injury. As Feraheme is used over longer periods of time by a wider group of patients taking numerous other medicines or bypatients with additional underlying health problems, the likelihood of adverse drug reactions or unintended side effects, including death, may increase.While these adverse events are rare, all IV irons, including Feraheme, can cause patients to experience serious hypersensitivity reactions, includinganaphylactic-type reactions, some of which have been life-threatening and/or fatal. Makena is a prescription hormone medicine (progestin) used to lower therisk of preterm birth in women who are pregnant and who have previously delivered preterm in the past. It is not known if Makena is safe and effective inwomen who have other risk factors for preterm birth and in one clinical study, certain complications or events associated with pregnancy occurred more oftenin women who received Makena, including miscarriage (pregnancy loss before 20 weeks of pregnancy), hospital admission for preterm labor, preeclampsia,gestational hypertension and gestational diabetes. In addition, other hormones administered during pregnancy have in the past been shown to cross theplacenta and have negative effects on the offspring. Similarly, as Intrarosa becomes more widely used and if Vyleesi, if approved, and our other productcandidates are introduced to the market, more serious adverse reactions than those reported during clinical trials could arise. Although we maintain productliability insurance coverage for claims arising from the use of our products in clinical trials and commercial use, liability insurance coverage claims may bedenied in whole or in part, coverage is expensive, and we may not be able to maintain sufficient insurance at a reasonable cost, if at all. Product liabilityclaims and any resulting litigation, whether or not they have merit, may generate negative publicity and could decrease demand for our products, cause otherparties to submit claims or demands, subject us to product recalls, harm our reputation, cause us to incur substantial costs, and divert management’s time andattention.We may also be the target of claims asserting violations of securities and fraud and abuse laws and derivative actions or other litigation. Any suchlitigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operatingresults and financial condition. Further, we may not be successful in defending ourselves in a litigation and, as a result, our business could be materiallyharmed and, as with any product liability litigation, regardless of the outcome, these claims or suits may generate negative publicity, cause other parties tosubmit claims or demands, harm our reputation and divert management’s time and attention. These lawsuits may also result in large judgments or settlementsagainst us, any of which could have a negative effect on our financial condition and business if in excess of our insurance coverage. Though we maintainliability insurance, if any costs or expenses associated with litigation exceed our insurance coverage or insurance coverage is denied, we may be forced tobear some or all of these costs and expenses directly, which could be substantial.47Table of ContentsWe must work effectively and collaboratively with our licensors to develop, market and/or sell certain products in our portfolio. We have limited experience commercializing licensed products, and the addition of Intrarosa and Vyleesi to our product portfolio means that our futurerevenues are more dependent upon our ability to work effectively and collaboratively with our licensors to develop, market and/or sell the licensed productsin our portfolio, including to obtain or maintain regulatory approval. Our arrangements with licensors is critical to successfully bringing our licensedproducts to market and successfully commercializing them. We rely on our licensors in various respects, including undertaking research and developmentprograms and conducting clinical trials for our licensed products, managing or assisting with the regulatory filings and obtaining approval and maintainingand/or assisting with our commercialization efforts. We do not control our licensors, some of whom may be inexperienced, have a limited operating history,face financial and business hardships (including solvency issues), have limited operations or financial or other resources or have limited or no experiencewith commercialization activities; therefore, we cannot ensure that these third parties will adequately and timely perform all of their obligations to us. Forexample, we are dependent upon the contributions of Endoceutics, a small company, to exclusively provide us with all commercial supply and conductcertain clinical and commercialization activities. We cannot guarantee the satisfactory performance of any of our licensors and if any of our licensors breachor terminate their agreements with us, we may not be able to successfully commercialize the licensed product, which could materially and adversely affect ourbusiness, financial condition, cash flows and results of operations.Further, even if contractual safeguards are in place in our licensing arrangements, our licensors may use their own or other technology to develop analternative product and withdraw their support of the licensed product, or compete with the licensed product. Our licensing arrangements could also limit ouractivities, including our ability to compete with our licensors in certain geographic or therapeutic areas. For example, Endoceutics’ assets, including theintellectual property licensed to us, are subject to a security interest held by a third-party lender, and therefore our rights and remedies under the licenseagreement may be impaired or inadequate. Disputes may arise between us and a licensor and may involve the ownership of technology developed under alicense or other issues arising out of collaborative agreements. In addition, we must work collaboratively with our partners to conduct various activities and ifwe cannot do so effectively, disagreements could arise. Such disagreements could delay the related program or result in distraction or expensive arbitration orlitigation, which may not be resolved in our favor.Our license and purchase agreements contain complex provisions and impose various milestone payment, royalty, insurance, diligence, reporting andother obligations on us. If we fail to comply with our obligations, our partners may have the right to terminate the license agreement, in which event wewould not be able to continue developing or commercializing the licensed products, or we may incur additional costs or may be required to litigate anydisputes. If our partners allege that we have breached our obligations under such arrangements, even if such allegations are without merit, defending suchallegations, including complying with any audit, reporting or dispute resolution provisions of such agreement, or conducting any investigations, can beexpensive and utilize considerable amounts of management’s time and efforts. For example, under the terms of our agreement with Lumara Health, the formershareholders of Lumara Health through its shareholder representatives can exercise a right to review our books and records related to the calculation ofrevenue which trigger the milestone payments owed to Lumara Health. Termination of a license agreement or reduction or elimination of our licensed rightsmay result in our having to negotiate new or reinstated licenses with less favorable terms, and, if we lose rights to the licensed products it could materiallyand adversely affect our business.We rely on third parties in the conduct of our business, including our clinical trials and product distribution, and if they fail to fulfill their obligations, ourcommercialization and development plans may be adversely affected.We rely on and intend to continue to rely on third parties, including licensors, CROs, healthcare providers, third-party logistics providers, packaging,storage and labeling providers, wholesale distributors and certain other important vendors and consultants in the conduct of our business. For example, we orour partners contract with, and plan to continue to contract with, certain CROs to provide clinical trial services for the development of our product candidatesor expansion of product indications, including site selection, enrollment, monitoring, data management and other services, in connection with the conduct ofour clinical trials and the preparation and filing of our regulatory applications. Although we depend heavily on these parties, we do not control them and, therefore, we cannot ensure that these third parties will adequately and timelyperform all of their obligations to us. If our third-party service providers cannot adequately fulfill their obligations to us or our licensors in a timely andsatisfactory manner, if the quality and accuracy of our clinical trial data or our regulatory submissions are compromised due to poor quality or failure toadhere to our protocols or regulatory requirements, or if such third parties otherwise fail to adequately discharge their responsibilities or meet deadlines, ourcurrent and future development plans and regulatory submissions, or our commercialization efforts in current indications, may be48Table of Contentsdelayed, terminated, limited or subject us to additional expense or regulatory action, which would adversely impact our ability to generate revenues.Further, in many cases, we do not currently have back-up providers to perform these tasks. If any of these third parties experience significant difficultiesin their respective processes, fail to maintain compliance with applicable legal or regulatory requirements, fail to meet expected deadlines or otherwise do notcarry out their contractual duties to us or our licensors, or encounter physical or natural damages at their facilities, our ability to deliver our products to meetcommercial demand could be significantly impaired. The loss of any third-party provider, especially if compounded by a delay or inability to secure analternate distribution source for end-users in a timely manner, could cause the distribution of our products to be delayed or interrupted, which would have anadverse effect on our business, financial condition and results of operations.Additionally, we have limited experience independently commercializing multiple pharmaceutical products and collaborating with partners tocommercialize multiple licensed products, including managing and maintaining a supply chain and distribution network for multiple products, and we areplacing substantial reliance on licensors and other third parties to perform this expanded network of supply chain and distribution services for us. Forexample, we rely on may have to rely on other parties with whom we may enter into future agreements, to perform or oversee certain functions, such assupply, research and development, or the regulatory process for the product we license from them, and any failure of such party to perform these functions forany reason, including ceasing doing business, could have a material effect on our ability to commercialize the product.Our success depends on our ability to attract and retain key employees, and any failure to do so may be disruptive to our operations.We are a pharmaceutical company focused on marketing our commercial products and developing our product candidates. We plan to continue toexpand our portfolio, including through the addition of commercial or development-stage products through acquisitions and in-licensing; thus, the range ofskills of our executive officers and management needs to be broad and deep. If we are not able to hire and retain talent to drive commercialization and theexpansion of our portfolio, we will be unlikely to maintain or increase our profitability. Because of the specialized and broad nature of our business,including both commercialized and development-stage products (some of which are licensed to us), our success depends to a significant extent on our abilityto continue to attract, retain and motivate qualified sales, technical operations, managerial, scientific, regulatory compliance and medical personnel of alllevels. The loss of key personnel or our inability to hire and retain personnel who have such sales, technical operations, managerial, scientific, regulatorycompliance and medical backgrounds could materially adversely affect our business (including research and development efforts). For example, in February2019, we implemented a workforce reduction in connection with the combination of our women’s and maternal health sales forces into one integrated salesteam. As a result, our workforce was reduced by approximately 110 employees, approximately 100 of whom were part of our field-based commercialorganization with the remainder coming from our general and administrative functions. This workforce reduction may be disruptive to our operations,including by distracting management from our core business and affecting employee productivity and moral.Risks Related to Regulatory MattersThere have been, and we expect there will continue to be, a number of federal and state legislative initiatives implemented to reform the U.S. healthcaresystem in ways that could adversely impact our business and our ability to sell our products profitably.We expect that the ACA, as currently enacted or as it may be amended in the future, the 21st Century Cures Act, and other healthcare reform measuresthat may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase our sales. Thesechanges might impact existing government healthcare programs and may result in the development of new programs, including Medicare payment forperformance initiatives and improvements to the physician quality reporting system and feedback program. Changes that may affect our business include, butare not limited to, those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under thehealth insurance exchanges, expansion of the Medicaid Drug Rebate Program, Medicare, the 340B Drug Pricing Program under the Public Health ServicesAct (the “340B Program”), and fraud and abuse enforcement. For example, beginning April 1, 2013, Medicare payments for all items under Parts A and B,including drugs and biologics, and most payments to plans under Medicare Part D were reduced by 2% under the sequestration (i.e., automatic spendingreductions) required by the Budget Control Act of 2011 (the “BCA”) as amended by the American Taxpayer Relief Act of 2012. The BCA requiressequestration for most federal programs, excluding Medicaid, Social Security, and certain other programs. The BCA caps the cuts to Medicare payments foritems at 2% and subsequent legislation extended the 2% reduction, on average, to 2027.49Table of ContentsWe cannot predict the impact that newly enacted laws or any future legislation or regulation will have on us. We expect that there will continue to be anumber of U.S. federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs. These efforts could adverselyaffect our business by, among other things, limiting the prices that can be charged for our products, or the amount of reimbursement rates and terms availablefrom governmental agencies or third-party payers, limiting the profitability of our products, increasing our rebate liability or limiting the commercialopportunities for our products, including acceptance by healthcare payers, or increasing scrutiny for announced price increases.Our partners, including our licensors, are subject to similar requirements and thus the attendant risks and uncertainties. If our partners, including ourlicensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted,which could have a material and adverse impact on our revenues.If our products are marketed or distributed in a manner that violates federal or state healthcare fraud and abuse laws, marketing disclosure laws or otherfederal or state laws and regulations, we may be subject to civil or criminal penalties.In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of ourproducts, are subject to extensive additional federal and state healthcare regulation, including the Federal Anti-Kickback Statute and the Federal FalseClaims Act (“FCA”) (and their state analogues), as discussed above in Item 1 under the heading “Government Regulation - Fraud and Abuse Regulation.” Ifwe or our partners, such as licensors, fail to comply with any federal and state laws or regulations governing our industry, we could be subject to criminal andcivil penalties and a range of regulatory actions that could adversely affect our ability to commercialize our products, harm or prevent sales of our products,or substantially increase the costs and expenses of commercializing and marketing our products, all of which could have a material adverse effect on ourbusiness, financial condition and results of operations.Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws, and private individuals have been active inbringing lawsuits on behalf of the government under the FCA and similar regulations in other countries. In addition, incentives exist under applicable U.S.law that encourage employees and physicians to report violations of rules governing promotional activities for pharmaceutical products. These incentivescould lead to so-called whistleblower lawsuits as part of which such persons seek to collect a portion of moneys allegedly overbilled to government agenciesas a result of, for example, promotion of pharmaceutical products beyond labeled claims. For example, federal enforcement agencies recently have showedinterest in pharmaceutical companies’ product and patient assistance programs, including manufacturer reimbursement support services and relationshipswith specialty pharmacies. Some of these investigations have resulted in government enforcement authorities intervening in related whistleblower lawsuitsand obtaining significant civil and criminal settlements. Such lawsuits, whether with or without merit, are typically time-consuming and costly to defend.Such suits may also result in related shareholder lawsuits, which are also costly to defend.Further, the FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, aproduct may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. For drug products like Makena thatare approved by the FDA under the FDA’s accelerated approval regulations, unless otherwise informed by the FDA, the sponsor must submit promotionalmaterials at least 30 days prior to the intended time of initial dissemination of the promotional materials, which delays and may negatively impact ourcommercial team’s ability to implement changes to Makena’s marketing materials, thereby negatively impacting revenues. Moreover, under the provisions ofthe FDA’s “Subpart H” Accelerated Approval regulations, the FDA may also withdraw approval of Makena if, among other things, the promotional materialsare false or misleading, or other evidence demonstrates that Makena is not shown to be safe or effective under its conditions of use.In recent years, several states have enacted legislation requiring pharmaceutical companies to establish marketing and promotional compliance programsor codes of conduct and/or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and otheractivities. Several states have also adopted laws that prohibit certain marketing-related activities, including the provision of gifts, meals or other items tocertain healthcare providers.We have developed and implemented a corporate compliance program based on what we believe are current best practices in the pharmaceuticalindustry; however, relevant compliance laws are broad in scope and there may not be regulations, guidance or court decisions that definitively interpret theselaws in the context of particular industry practices. We cannot guarantee that we, our employees, our partners, our consultants or our contractors are or will bein compliance with all federal and state regulations. If we, our partners, or our representatives fail to comply with any of these laws or regulations, a range offines, penalties and/or other sanctions could be imposed on us, including, but not limited to, restrictions on how we market and sell our products, significantfines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions. Even if we are not determined tohave violated these laws, government investigations into these50Table of Contentsissues typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business,financial condition and results of operations. Such investigations or suits may also result in related shareholder lawsuits, which can also have an adverseeffect on our business.Our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties. If our partners,including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could benegatively impacted, which could have a material and adverse impact on our revenues.If we fail to comply with our reporting and payment obligations under governmental pricing programs, we could be required to reimburse governmentprograms for underpayments and could pay penalties, sanctions and fines, which could have a material adverse effect on our business, financial conditionand results of operations.As a condition of reimbursement by various federal and state health insurance programs, we are required to calculate and report certain pricinginformation to federal and state agencies. Please see our discussion above in Item 1 under the heading, “Pharmaceutical Pricing and Reimbursement” formore information regarding price reporting obligations under the 340B Program and the Department of Veterans Affairs Federal Supply Schedule (the “FSS”)program.The regulations governing the calculations, price reporting and payment obligations are complex and subject to interpretation by various governmentand regulatory agencies, as well as the courts. Reasonable assumptions have been made where there is lack of regulations or clear guidance and suchassumptions involve subjective decisions and estimates. We are required to report any revisions to our calculations, price reporting and payment obligationspreviously reported or paid. Such revisions could affect our liability to federal and state payers and also adversely impact our reported financial results ofoperations in the period of such restatement.Uncertainty exists as new laws, regulations, judicial decisions, or new interpretations of existing laws, or regulations related to our calculations, pricereporting or payments obligations increases the chances of a legal challenge, restatement or investigation. If we become subject to investigations,restatements, or other inquiries concerning our compliance with price reporting laws and regulations, we could be required to pay or be subject to additionalreimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations. Inaddition, it is possible that future healthcare reform measures could be adopted which could result in increased pressure on pricing and reimbursement of ourproducts and thus have an adverse impact on our financial position or business operations.Further, state Medicaid programs may be slow to invoice pharmaceutical companies for calculated rebates resulting in a significant lag between the timea sale is recorded and the time the rebate is paid. This results in us having to carry a significant liability on our consolidated balance sheets for the estimate ofrebate claims expected for Medicaid patients. For example, almost half of branded Makena sales are reimbursed through state Medicaid programs and aresubject to the statutory Medicaid rebate, and in some cases, supplemental rebates offered by us. If actual claims are higher than current estimates, ourfinancial position and results of operations could be adversely affected.In addition to retroactive rebates and the potential for 340B Program refunds, if we are found to have knowingly submitted any false price informationrelated to the Medicaid Drug Rebate Program to CMS, we may be liable for civil monetary penalties. Such failure could also be grounds for CMS to terminateour Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement,federal payments may not be available under government programs, including Medicaid or Medicare Part B, for our covered outpatient drugs.Additionally, if we overcharge the government in connection with the FSS program or Tricare Retail Pharmacy Program, whether due to a misstatedFederal Ceiling Price or otherwise, we are required to refund any overpayment to the government. Failure to make necessary disclosures and/or to identifycontract overcharges can result in allegations against us under the FCA and other laws and regulations. Unexpected refunds to the government, andresponding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on ourbusiness, financial condition, results of operations and growth prospects.Our partners, including our licensors, are subject to similar requirements and thus the attendant risks and uncertainties. If our partners, including ourlicensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted,which could have a material and adverse impact on our revenues.51Table of ContentsWe are subject to ongoing regulatory obligations and oversight of our products, and any failure by us to maintain compliance with applicable regulationsmay result in several adverse consequences including the suspension of the manufacturing, marketing and sale of our respective products, the incurrence ofsignificant additional expense and other limitations on our ability to commercialize our respective products.We are subject to ongoing regulatory requirements and review, including periodic audits pertaining to the development, manufacture, labeling,packaging, adverse event reporting, distribution, storage, marketing, promotion, record keeping and export of our respective products. Failure to comply withsuch regulatory requirements or the later discovery of previously unknown problems with the manufacture, distributions and storage of our products, or ourthird-party contract manufacturing facilities or processes by which we manufacture our products may result in restrictions on our ability to manufacture,market, distribute or sell our products, including potential withdrawal of our products from the market. Any such restrictions could result in a decrease insales, damage to our reputation or the initiation of lawsuits against us and/or our third-party contract manufacturers. We may also be subject to additionalsanctions, including, but not limited, to the following:•Warning letters, public warnings and untitled letters;•Court-ordered seizures or injunctions;•Civil or criminal penalties, or criminal prosecutions;•Variation, suspension or withdrawal of regulatory approvals for our products;•Changes to the package insert of our products, such as additional warnings regarding potential side effects or potential limitations on the currentdosage or administration;•Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or other issuesinvolving our products;•Implementation of risk mitigation programs and post-approval obligations;•Restrictions on our continued manufacturing, marketing, distribution or sale of our products;•Temporary or permanent closing of the facilities of our third-party contract manufacturers;•Interruption or suspension of clinical trials; and•Refusal by regulators to consider or approve applications for additional indications.Any of the above sanctions could have a material adverse impact on our revenues and profitability or the value of our brand, and cause us to incursignificant additional expenses.In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the FDC Act, the FDA has broad authority toforce us to take any number of actions, including, but not limited to, the following:•Requiring us to conduct post-approval clinical studies to assess known risks or new signals of serious risks, or to evaluate unexpected serious risks;•Mandating changes to a product’s label;•Requiring us to implement a risk evaluation and mitigation strategy where necessary to assure safe use of the drug; or•Removing an already approved product from the market.Further, our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties. If ourpartners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products couldbe negatively impacted, which could have a material and adverse impact on our revenues.52Table of ContentsRegulators could determine that our clinical trials and/or our manufacturing processes, and/or our storage or those of our third parties, were not properlydesigned or are not properly operated, which could cause significant costs or setbacks for approval of our product candidates or our commercializationactivities.We are obligated to conduct, and are in the process of conducting, clinical trials for certain of our products and product candidates and certain post-approval clinical trials and we may be required to conduct additional clinical trials, including if we pursue approval of additional indications, newformulations or methods of administration for our products, seek commercialization in other jurisdictions, or in support of our current indications. Similarly,our licensors are conducting certain clinical trials to gain approval in various indications for drug product candidates. The FDA could determine that ourclinical trials, or those of our licensors, and/or our or their manufacturing processes were not properly designed, did not include enough patients orappropriate administration, were not conducted in accordance with applicable laws and regulations, or were otherwise not properly managed. In addition,according to cGCP we and/or our licensors are responsible for conducting, recording and reporting the results of clinical trials to ensure that the data andresults are credible and accurate and that the trial participants are adequately protected. The FDA may conduct inspections of clinical investigator sites whichare involved in clinical development programs for our proprietary or licensed products to ensure their compliance with cGCP regulations. If the FDAdetermines that we, our licensors, our respective CROs or our respective study sites fail to comply with applicable cGCP regulations, the FDA may deem theclinical data generated in such clinical trials to be unreliable and may disqualify certain data generated from those sites or require us and/or our licensors toperform additional clinical trials. For example, many of the clinical trials for our development programs that we have acquired or in-licensed were conductedby small companies that might have had fewer controls or oversight related to their clinical programs. Clinical trials and manufacturing processes are subjectto similar risks and uncertainties outside of the U.S. Any such deficiency in the design, implementation or oversight of clinical development programs orpost-approval clinical studies could cause us to incur significant additional costs, experience delays or prevent us from commercializing our approvedproducts in their current indications, or obtaining marketing approval for additional indications or for our product candidates, including Vyleesi, AMAG-423and ciraparantag.Further, our third-party contract manufacturing facilities and those of our licensors are subject to cGMP regulations enforced by the FDA and equivalentforeign regulations and regulatory agencies through periodic inspections to confirm such compliance. Contract manufacturers must continually expend time,money and effort in production, record-keeping and quality assurance and control to ensure that these manufacturing facilities meet applicable regulatoryrequirements. Failure to maintain ongoing compliance with cGMP or similar foreign regulations and other applicable manufacturing requirements of variousU.S. or foreign regulatory agencies could result in, among other things, the issuance of warning letters, fines, the withdrawal or recall of our products from themarketplace, failure to approve product candidates for commercialization, total or partial suspension of product production, the loss of inventory, suspensionof the review of our or our licensors’ current or future NDAs or equivalent foreign filings, enforcement actions, injunctions or criminal prosecution andsuspension of manufacturing authorizations. For example, in early 2017, our primary third-party manufacturer of Makena received a warning letter from theFDA, which has resulted in supply disruptions of our Makena IM products that led to our current out-of-stock situation for both our single-dose and multi-dose branded Makena vials as well as periodic disruptions to our authorized generic supply. A government-mandated recall or a voluntary recall could divertmanagerial and financial resources, could be difficult and costly to correct, could result in the suspension of sales of our products and reputational harm, andcould have a severe adverse impact on our profitability and the future prospects of our business. If any regulatory agency inspects any of these manufacturingfacilities and determines that they are not in compliance with cGMP or similar regulations or our contract manufacturers otherwise determine that they are notin compliance with these regulations, as applicable, such contract manufacturers could experience an inability to manufacture sufficient quantities of productto meet demand or incur unanticipated compliance expenditures.We and our licensors have also established certain testing and release specifications with the FDA. This release testing must be performed in order toallow products to be used for commercial sale. If a product does not meet these release specifications or if the release testing is variable, we may not be able tosupply product to meet our projected demand. We monitor annual batches of our products for ongoing stability after it has been released for commercial sale.If a particular batch of product exhibits variations in its stability or begins to generate test results that demonstrate an adverse trend against our specifications,we may need to conduct an investigation into the test results, quarantine the product to prevent further use, destroy existing inventory no longer acceptablefor commercial sale, or recall the batch or batches. If we or our licensors are unable to develop, validate, transfer or gain regulatory approval for the newrelease test, our ability to supply product will be adversely affected. Such setbacks could have an adverse impact on our revenues, our profitability and thefuture prospects of our business.53Table of ContentsThe FDA has required post-approval studies to verify and describe the clinical benefit of Makena, and the FDA may limit further marketing of the productbased on the results of these post-approval studies, failure to complete these trials in a timely manner or evidence of safety risks or lack of efficacy.Makena was approved by the FDA in February 2011 under Subpart H. As a condition of approval under Subpart H, the FDA required that Makena’ssponsor perform certain adequate and well-controlled post-approval clinical studies to verify and describe the clinical benefits of Makena as well as fulfillcertain other post-approval commitments. We have recently completed enrollment of the confirmatory clinical study of Makena and expect to release thedata by the end of the first quarter of 2019. Furthermore, a follow-up study of the babies born to mothers from the efficacy and safety clinical study iscurrently ongoing and is expected to be completed by July 2020. If the required post-approval studies fail to verify the clinical benefits of the drug or if wefail to perform the required post-approval studies with due diligence, the FDA has the authority to withdraw approval of the drug following a hearingconducted under the FDA’s regulations, which would have a materially adverse impact on our business. We cannot be certain of the results of theconfirmatory clinical studies or what action the FDA may take if the results of those studies are not as expected based on clinical data that FDA has alreadyreviewed.Our failure to comply with data protection laws and regulations could lead to government enforcement actions (which could include civil or criminalpenalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.We are subject to complex laws and regulations that address privacy and data security. The legislative and regulatory landscape for data protectioncontinues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In the U.S., numerous federal and state lawsand regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, governthe collection, use, disclosure, and protection of health-related and other personal information. For example, in June 2018, the State of California enacted theCalifornia Consumer Privacy Act of 2018 (the “CCPA”), which will come into effect on January 1, 2020 and provides new data privacy rights for consumersand new operational requirements for companies, which may increase our compliance costs and potential liability. The CCPA gives California residentsexpanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about howtheir personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expectedto increase data breach litigation. The CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which couldincrease our potential liability and adversely affect our business.In addition, in the course of our business, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) thatis subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the HealthInformation Technology for Economic and Clinical Health Act (“HITECH”). Although we are not directly subject to HIPAA (other than potentially withrespect to providing certain employee benefits) we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable healthinformation maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA/HITECH.We could also be negatively impacted by existing and proposed laws and regulations, as well as government policies and practices related tocybersecurity, data privacy, data localization and data protection outside of the U.S., such as the General Data Protection Regulation (“GDPR”), which tookeffect in the EU in May 2018. The GDPR extends the geographical scope of EU data protection law to non-EU entities under certain conditions, tightensexisting EU data protection principles and creates new obligations for companies and new rights for individuals. Although we believe we are in compliancethe applicable provisions of the GDPR, the GDPR is new and therefore guidance, interpretation and enforcement under the GDPR are still developing. TheGDPR may increase our responsibility and potential liability in relation to personal data that we process, expose us to substantial potential fines and increaseour compliance costs. Notably, on January 21, 2019, Google was fined nearly $57.0 million by French regulators for violating GDPR. The GDPR could alsocause our development costs to increase in connection with clinical trials we are currently conducting and may conduct in the future in the EU for ourproducts and product candidates.Failure to comply with data protection laws and regulations both within and outside of the U.S. could result in government enforcement actions (whichcould include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.Significant disruptions of information technology systems or security breaches could adversely affect our business.We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. In the ordinary course of business,we collect, store, and transmit large amounts of confidential information (including, but not limited to, intellectual property, proprietary businessinformation, and personal information). It is critical that we do so in a54Table of Contentssecure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to thirdparties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information. The size and complexity ofour information technology systems, and those of third-party vendors with whom we contract, and the large amounts of confidential information stored onthose systems, make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by ouremployees, third-party vendors, and/or business partners, or from cyber-attacks by malicious third parties. Cyber-attacks are increasing in their frequency,sophistication, and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information.Significant disruptions of our information technology systems or security breaches could adversely affect our business operations and/or result in the loss,misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including, but not limited to,trade secrets or other intellectual property, proprietary business information, and personal information), and could result in financial, legal, business, andreputational harm to us. For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personalinformation regarding our patients or employees, could harm our reputation, require us to comply with federal and/or state breach notification laws andforeign law equivalents, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information.Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the typedescribed above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurancethat such measures will prevent service interruptions or security breaches that could adversely affect our business.Risks Related to our Financial Condition and ResultsWe may not be able to generate sufficient revenues to achieve and maintain profitability in the future.In recent years, we have focused on developing a broad product portfolio, including through acquisitions and in-licensing arrangements. The additionsto our product portfolio include both commercial products, such as Makena and Intrarosa, which require significant resources to commercialize and productcandidates, such as Vyleesi, AMAG-423 and ciraparantag, which require substantial development time and resources before they might generate revenues, ifat all. Investment in our development and commercialization efforts often requires significant up-front costs and our products may fail to achieve or maintaincommercial success or our product candidates may never receive approval. We expect to continue to incur significant expenses as we continue tocommercialize Feraheme, Makena, Intrarosa and Vyleesi, if approved, and develop AMAG-423 and ciraparantag. We may encounter unforeseen expenses,difficulties, complications, delays and other unknown factors that may adversely affect our business. As a result of the substantial expenditures required tosupport our products and product candidates, we will need to generate sufficient revenues in future periods to achieve and maintain profitability and positivecash flows. In recent years, our profitability was based primarily on our Makena revenues. However, during 2018, we lost market exclusivity for Makena andgeneric competition commenced in mid-2018. We expect that revenues from sales of Makena will continue to decline in future years due to increased genericcompetition, including other generic versions of Makena which have been and may be approved by the FDA. There is no guarantee that we will generatesufficient revenues to support our business, or that we will be able to achieve profitability or maintain profitability, if achieved, and there is no guarantee thatwe will be able to maintain positive cash flow from operations. In the past, we have financed our operations primarily from the issuance of debt and equity,cash from products sales and cash generated by our investing activities. As of December 31, 2018, we incurred an operating loss of $47.0 million,contributing to an accumulated deficit of approximately $542.4 million.Due to the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, as well as those related to ourexpectations for our products and other commercial activities, we are unable to predict with certainty the extent of any future losses. Our ability to achievesustained profitability in the future depends, in large part, on our ability to:•Obtain regulatory approval for our current product candidates, particularly Vyleesi, or any future product candidates;•Generate revenues from our product candidates, if approved, and continue to grow revenues from our approved products;•Successfully commercialize our existing products, including the costs of and success of our marketing and awareness campaigns for Intrarosa andVyleesi, if approved;•Enter into and maintain agreements to develop our product candidates and commercialize our products;55Table of Contents•Manufacture our products in sufficient quantities to meet demand;•Obtain adequate reimbursement coverage for our products from insurance companies, government programs and other third-party payors;•Progress our clinical development programs in a timely and cost-effective manner, including our ongoing clinical trials for AMAG-423 andciraparantag; and•Identify, assess and consummate potential product acquisitions in a cost-effective manner and successfully develop any products we acquire.If we are not successful in marketing and selling our products, if revenues grow more slowly than we anticipate, if our product candidates are notapproved, or if our operating expenses exceed our expectations, or if we are otherwise unable to achieve, maintain or increase profitability on a quarterly orannual basis, our business, results of operations and financial condition could be materially adversely affected and the market price of our common stock maydecline.We may not be able to generate sufficient cash flow to service all of our indebtedness and other obligations.As of December 31, 2018, we had approximately $341.4 million of total debt outstanding, including $320.0 million aggregate principal amount of ourconvertible notes due June 1, 2022 bearing interest at 3.25% annually (the “2022 Convertible Notes”) issued in May 2017.Our ability to make scheduled payments of the principal of, or to pay interest on the 2022 Convertible Notes depends on our future performance, whichis subject to economic, financial, competitive and other factors that may be beyond our control. Our business may not generate cash flow from operations inthe future sufficient to service our debt and support our growth strategies. If we are unable to generate such cash flow, we may be required to adopt one ormore alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our abilityto repay our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of theseactivities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including under our 2022 ConvertibleNotes obligations. In addition, if for any reason we are unable to meet our debt service and repayment obligations, we could be in default under the terms ofthe agreements governing our indebtedness, which could allow our creditors at that time to declare all outstanding indebtedness to be due and payable.Under these circumstances, we may not have sufficient funds to satisfy our debt obligations.Further, holders of the 2022 Convertible Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (whichincludes certain change of control transactions, stockholder-approved liquidations and dissolutions and certain stock exchange delisting events) at arepurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. Upon conversion of the 2022Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering anyfractional share), we will be required to make cash payments in respect of the notes being converted. We may not have enough available cash or be able toobtain financing at the time we are required to make repurchases of the 2022 Convertible Notes upon an occurrence of a fundamental change. Further,because the indentures governing the 2022 Convertible Notes require that we elect the method by which we will settle conversions significantly in advanceof when we are required to deliver the conversion consideration, we may not have sufficient cash available or be able to obtain financing at the time we areultimately required to settle the 2022 Convertible Notes. Our failure to repurchase the 2022 Convertible Notes at a time when the repurchase is required bythe indenture or to pay any cash payable on future conversions of the 2022 Convertible Notes would constitute an event of default.We may need additional capital to achieve our business objectives and make contingent payments that may become due under our strategic transactionarrangements, which could cause significant dilution to our stockholders.We may require additional funds or need to establish additional alternative strategic arrangements to execute a business development transaction. Wehave expended and continue to expend substantial costs associated with the clinical development of our product candidates, including AMAG-423 andciraparantag, the continued commercialization of our products, our debt obligations and certain milestone payments to our partners. We may at any time seekfunding through additional arrangements with collaborators through public or private equity or debt financings, which could result in dilution to ourstockholders or increased fix payment obligations. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. The conditions of the credit and capital markets can be volatile,unpredictable and inconsistent and we may not be able to obtain financing or to secure56Table of Contentsalternative strategic arrangements on acceptable terms or within an acceptable timeframe, if at all, which would limit our ability to execute on our strategicplans. Moreover, we may experience a reduction in value or loss of liquidity with respect to our investments, which would put further strain on our cashresources.Our current level of cash on hand may limit our ability to take advantage of attractive business development opportunities and execute on our strategicplans. In addition, our cash on hand may not be sufficient to make any cash milestone payments to our partners upon the achievement of sales or regulatorymilestones. Our ability to make these required payments could be adversely affected if we do not achieve expected revenue and cash flow forecasts, or if weare unable to find other sources of cash in the future. We may also suffer reputational harm and be viewed as an undesirable acquiror or business developmentpartner if we are unable to make the required payments under our strategic transaction arrangements. In addition, if equity or debt investors perceive that ourdebt levels are too high relative to our profit, our stock price could be negatively affected and/or our ability to raise new equity or debt capital could belimited.We have in the past, and may in the future, enter into term loans and credit facilities with various banking institutions. Our ability and the terms onwhich we can borrow will be subject to the state of our operations and the debt market, which is unpredictable and beyond the scope of our control. We maynot be able to borrow required amounts on favorable terms, including favorable interest rates, or at all. Further, borrowings under such facilities may bearinterest at variable rates exposing us to interest rate risk.Our long-term capital requirements will depend on many other factors, including, but not limited to:•The commercial success of our products and costs associated with the commercialization of our products, including marketing, sales and distributioncosts;•The outcome, timing and costs associated with development and regulatory approval of our product candidates, including conducting clinical trials;•Our obligations to make milestone payments, royalty payments or both under our in-licensing arrangements;•Our ability to realize synergies and opportunities in connection with our acquisitions and portfolio expansion;•The outcome of and costs associated with any material litigation or patent challenges to which we may become a party;•The costs of manufacturing our products and product candidates, including the timing and magnitude of costs associated with qualifying additionalmanufacturing capacities and alternative suppliers; and•Our ability to raise additional capital on terms and within a timeframe acceptable to us, if necessary.Additional funds may not be available to us if and when we need them, on terms that are acceptable to us, or at all. If we are unable to raise additionalfunds, if needed, we may have to delay, scale back or discontinue the development or commercialization of one or more of our products or product candidatesand/or other areas of our business.Our ability to use net operating loss carryforwards and tax credit carryforwards is dependent on generating future taxable income and may be limited,including as a result of future transactions involving our common stock.In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” issubject to limitations on its ability to utilize its pre-change net operating losses and certain other tax assets to offset future taxable income. In general, anownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’lowest percentage ownership during the testing period, which is generally three years. An ownership change could limit our ability to utilize our netoperating loss and tax credit carryforwards for taxable years including or following such “ownership change” by allowing us to utilize only a portion of thenet operating losses and tax credits that would otherwise be available but for such ownership change. Limitations imposed on the ability to use net operatinglosses and tax credits to offset future taxable income or the failure to generate sufficient taxable income could require us to pay more U.S. federal incometaxes than we have estimated and could cause such net operating losses and tax credits to expire unused, in each case reducing or eliminating the benefit ofsuch net operating losses and tax credits and potentially adversely affecting our financial position, including our after-tax net income. Similar rules andlimitations may apply for state income tax purposes.57Table of ContentsThere can be no assurance that we will not undergo an ownership change and even minor accumulations by certain of our stockholders could result intriggering an ownership change under Section 382. If such an ownership change were to occur, we expect that our net operating losses could become limited;however, the amount of the limitation would depend on a number of factors including our market value at the time of the ownership change.In addition, we are potentially subject to ongoing and periodic tax examinations and audits in various jurisdictions, including with respect to theamount of our net operating losses and any limitation thereon. An adjustment to such net operating loss carryforwards, including an adjustment from a taxingauthority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.If we identify a material weakness in our internal controls over financial reporting, our ability to meet our reporting obligations and the trading price ofour stock could be negatively affected.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, amaterial weakness increases the risk that the financial information we report contains material errors.We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are requiredunder the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however welldesigned and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system aremet. If we, or our independent registered public accounting firm, determine that our internal controls over our financial reporting are not effective, or wediscover areas that need improvement in the future, or we experience high turnover of our personnel in our financial reporting functions, these shortcomingscould have an adverse effect on our business and financial results, and the price of our common stock could be negatively affected.If we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm isunable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in thereliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could subject us tosanctions and/or investigations by the U.S. Securities and Exchange Commission, NASDAQ or other regulatory authorities.If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements and/or our projected guidance proveinaccurate, our actual results may vary from those reflected in our projections and accruals.Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of theseconsolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of our assets, liabilities,revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, our management evaluates our critical and othersignificant estimates and assumptions, including among others those associated with revenue recognition related to sales; sales allowances and accruals;allowance for doubtful accounts, marketable securities; inventory; acquisition date fair value and subsequent fair value estimates used to assess impairmentof long-lived assets, including goodwill, in-process research and development and other intangible assets; contingent consideration; debt obligations;certain accrued liabilities, including clinical trial accruals; income taxes, including valuation allowances, and equity-based compensation expense. We baseour estimates on market data, our observance of trends in our industry, and various other assumptions that we believe to be reasonable under thecircumstances. If actual results differ from these estimates, there could be a material adverse effect on our financial results and the performance of our stock.Further, in January 2019, we issued financial guidance, including expected 2019 total revenue and profitability metrics, which is likewise based onestimates and the judgment of management. If, for any reason, we are unable to achieve our projected 2019 revenue or profitability, we may not realize ourpublicly announced financial guidance. If we fail to realize, or if we change or update any element of, our publicly disclosed financial guidance or otherexpectations about our business, our stock price could decline in value.As part of our revenue recognition policy, our estimates of product returns, rebates and chargebacks, accounts receivable, fees and other discounts requiresubjective and complex judgments due to the need to make estimates about matters that are inherently uncertain. Any significant differences between ouractual results and our estimates could materially adversely affect our financial position and results of operations.58Table of ContentsIn addition, to determine the required quantities of our products and their related manufacturing schedules, we also need to make significant judgmentsand estimates based on inventory levels, current market trends, anticipated sales, forecasts and other factors. Because of the inherent nature of estimates, therecould be significant differences between our estimates and the actual amount of product need. For example, the level of our access to wholesaler anddistributor inventory levels and sales data, which varies based on the wholesaler, distributor, clinic or hospital, affects our ability to accurately estimatecertain reserves included in our financial statements. Any difference between our estimates and the actual amount of product demand could result in unmetdemand or excess inventory, each of which would adversely impact our financial results and results of operations.We have significant goodwill and other intangible assets. Consequently, potential impairment of goodwill and other intangibles may significantly impactour profitability.Goodwill and other intangibles represent a significant portion of our assets. As of December 31, 2018 and 2017, goodwill and other net intangiblescomprised approximately 54% and 42%, respectively, of our total assets. Goodwill and other intangible assets are subject to an impairment analysis, whichinvolves judgment and assumptions, at least annually or whenever events or changes in circumstances indicate the carrying amount of the asset may not berecoverable. For example, we recorded intangible asset impairment charges of $319.2 million during 2017. The procedures, judgments and assumptions usedin our goodwill and intangible assets impairment testing, and the results of our testing, are discussed in Item 7 of this report “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” under the captions “Critical Accounting Policies” and “Results of Operations.” Events givingrise to impairment of goodwill or intangible assets are an inherent risk in the pharmaceutical industry and often cannot be predicted. As a result of thesignificance of goodwill and other intangible assets, our results of operations and financial position in a future period could be negatively impacted shouldadditional impairments of our goodwill or other intangible assets occur.Our operating results will likely fluctuate, including as a result of wholesaler, distributor and customer buying patterns, as such you should not rely on theresults of any single quarter to predict how we will perform over time.Our future operating results will likely vary from quarter to quarter depending on a number of factors, including, but not limited to, the factors describedin these Risk Factors, many of which we cannot control, as well as the timing and magnitude, as applicable, of:•Product revenues, including the decline in Makena sales and the extent to which sales of the Makena auto-injector and the Makena authorizedgeneric are able to offset the decrease in sales of Makena;•Regulatory approval of our product candidates, including Vyleesi, AMAG-423 and ciraparantag;•Costs associated with manufacturing batch failures or inventory write-offs due to out-of-specification release testing or ongoing stability testing thatresults in a batch no longer meeting specifications;•The loss of a key customer or group purchasing organizations (“GPOs”);•The timing of costs and liabilities incurred in connection with our clinical trials and other product development and commercialization efforts,business development activities or business development transactions into which we may enter;•Milestone payments we may be required to pay pursuant to contractual obligations;•Costs associated with the manufacture of our products, including costs of raw and other materials and costs associated with maintaining commercialand clinical inventory and qualifying additional manufacturing capacities and alternative suppliers;•Any changes to the mix of our business;•Any adverse impact on our financial results stemming from our recent corporate restructuring;•Changes in accounting estimates related to reserves on revenue, returns, contingent consideration, impairment of long-lived or intangible assets orgoodwill or other accruals or changes in the timing and availability of government or customer discounts, rebates and incentives;59Table of Contents•The implementation of new or revised accounting or tax rules or policies; and•The recognition of deferred tax assets during periods in which we generate taxable income and our ability to preserve our net operating losscarryforwards and other tax assets.Our results of operations, including, in particular, product revenues, may also vary from period to period due to the buying patterns of our wholesalers,distributors, pharmacies, clinics or hospitals, specialty pharmacies and physicians (“Customers”). Further, our contracts with GPOs often require certainperformance from the members of the GPOs on an individual account level or group level such as growth over prior periods or certain market share attainmentgoals in order to qualify for discounts off the list price of our products, and a GPO may be able to influence the demand for our products from its members in aparticular quarter through communications they make to their members. In the event the Customers with whom we do business determine to limit theirpurchases of our products, our product revenues could be adversely affected. Also, in the event the Customers purchase increased quantities of our productsto take advantage of volume discounts or similar benefits, our quarterly results will fluctuate as re-orders become less frequent, and our overall net pricingmay decrease as a result of such discounts and similar benefits. In addition, these contracts are often cancellable at any time by our customers, often withoutnotice, and are non-exclusive agreements within the Feraheme iron deficiency anemia market. While these contracts are intended to support the use of ourproducts, our competitors could offer better pricing, incentives, higher rebates or exclusive relationships.Our contracting strategies can also have an impact on the timing of certain purchases causing product revenues to vary from quarter to quarter. Forexample, in advance of an anticipated or rumored price increase, including following the publication of our quarterly ASP, which affects the rate at whichFeraheme is reimbursed, or a reduction in expected rebates or discounts for one of our products, customers may order our products in larger than normalquantities, which could cause sales to be lower in subsequent quarters than they would have been otherwise. Further, any changes in purchasing patterns orinventory levels, changes to our contracting strategies, increases in product returns, delays in purchasing products or delays in payment for products by oneof our distributors or GPOs could also have a negative impact on our revenue and results of operations.As a result of these and other factors, our quarterly operating results could fluctuate, and this fluctuation could cause the market price of our commonstock to decline. Results from one quarter should not be used as an indication of future performance.Risks Related to Our Common StockOur stock price has been and may continue to be volatile, and your investment in our stock could decline in value or fluctuate significantly, including as aresult of analysts’ activities.The market price of our common stock has been, and may continue to be, volatile, and your investment in our stock could decline in value or fluctuatesignificantly. Our stock price has ranged between $14.35 and $26.10 in the fifty-two week period through February 25, 2019. The stock market has from timeto time experienced extreme price and volume fluctuations, particularly in the biotechnology and pharmaceuticals sectors, which have often been unrelatedto the operating performance of particular companies. Various factors and events, including the factors and events described in these Risk Factors, many ofwhich are beyond our control, may have a significant impact on the market price of our common stock. Our stock price could also be subject to fluctuationsas a result of general market conditions, shareholder activism and attempts to disrupt our strategy by activist investors, sales of large blocks of our commonstock, the impact of our stock repurchase program or the dilutive effect of our 2022 Convertible Notes, other equity or equity-linked financings, or alternativestrategic arrangements that we may pursue.Our future operating results are subject to substantial uncertainty, and our stock price could decline significantly if we fail to meet or exceed analysts’forecasts and expectations. If any of the analysts who cover us downgrade our stock, lower their price target or issue commentary or observations about us orour stock that are perceived by the market as negative, our stock price would likely decline rapidly. In addition, if these analysts cease coverage of ourcompany, we could lose visibility in the market, which in turn could also cause our stock price to decline.60Table of ContentsCertain provisions in our charter and by-laws, certain provisions of our 2022 Convertible Notes, certain contractual relationships and certain Delawarelaw provisions could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts byour stockholders to replace or remove the current members of our Board.Certain provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a change of control or takeover attempt of ourcompany by a third-party as well as substantially impede the ability of our stockholders to benefit from a change of control or effect a change in managementand our Board. These provisions include:•The ability of our Board to increase or decrease the size of the Board without stockholder approval;•Advance notice requirements for the nomination of candidates for election to our Board and for proposals to be brought before our annual meetingof stockholders;•The authority of our Board to designate the terms of and issue new series of preferred stock without stockholder approval;•Non-cumulative voting for directors; and•Limitations on the ability of our stockholders to call special meetings of stockholders.As a Delaware corporation, we are subject to the provisions of Section 203 of the Delaware General Corporation Law (“Section 203”), which prevents usfrom engaging in any business combination with any “interested stockholder,” which is defined generally as a person that acquires 15% or more of acorporation’s outstanding voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder,unless the business combination is approved in the manner prescribed in Section 203. These provisions could have the effect of delaying or preventing achange of control, whether or not it is desired by, or beneficial to, our stockholders.In addition to the above factors, an acquisition of our company could be viewed by a potential acquiror as costly in light of the employment agreementswe have in place with our executive officers, as well as a company-wide change of control policy, which provide for severance benefits as well as the fullacceleration of vesting of any outstanding options or restricted stock units in the event of a change of control and subsequent termination of employment.Further, our Fourth Amended and Restated 2007 Equity Incentive Plan generally permits our Board to provide for the acceleration of vesting of optionsgranted under that plan in the event of certain transactions that result in a change of control.Furthermore, holders of the 2022 Convertible Notes have the right to require us to repurchase their notes at a price equal to 100% of the principal amountthereof and the conversion rate for the 2022 Convertible Notes may be increased as described in the indenture, in each case, upon the occurrence of certainchange of control transactions, which could have the effect of preventing a change of control, whether or not it is desired by, or beneficial to, ourstockholders, or may result in the acquisition of us being on terms less favorable to our stockholders than it would otherwise be.ITEM 1B. UNRESOLVED STAFF COMMENTS:None.ITEM 2. PROPERTIES:In June 2013, we entered into a lease agreement with BP Bay Colony LLC (the “Landlord”) for the lease of certain real property located at 1100 WinterStreet, Waltham, Massachusetts for use as our principal executive offices. The initial term of the lease was five years and two months with one five-yearextension term at our option. We have entered into several amendments to the original lease to add additional space and to extend the term of the originallease to April 2021. In addition to base rent, we are also required to pay a proportionate share of the Landlord’s operating costs.See Note P, “Commitments and Contingencies,” to our consolidated financial statements included in this Annual Report on Form 10‑K for additionalinformation.61ITEM 3. LEGAL PROCEEDINGSWe accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonablyestimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel andother relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations orlegal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain matters, theliability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, in accordance with therelevant authoritative guidance, for any matters in which the likelihood of material loss is at least reasonably possible, we will provide disclosure of thepossible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect. See Note P, “Commitments andContingencies,” to our consolidated financial statements included in this Annual Report on Form 10-K for a description of our legal proceedings.ITEM 4. MINE SAFETY DISCLOSURESNot Applicable.62Table of ContentsPART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES:Market InformationOur common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “AMAG.” On February 25, 2019, the closingprice of our common stock, as reported on the NASDAQ, was $15.57 per share.StockholdersOn February 25, 2019, we had approximately 90 stockholders of record of our common stock, and we believe that the number of beneficial holders of ourcommon stock was approximately 8,000 based on responses from brokers to a search conducted by Broadridge Financial Solutions, Inc. on our behalf.Repurchases of Equity SecuritiesThe following table provides certain information with respect to our purchases of shares of our stock during the three months ended December 31, 2018.Period Total Numberof SharesPurchased (1) Average PricePaid Per Share Total Number of Shares Purchased as Part ofPublicly AnnouncedPlans or Programs (2) Maximum Number of Shares (or approximatedollar value) That May Yet BePurchased Under thePlans or Programs (2)October 1, 2018 through October 31, 2018 266 $21.28 — 953,788November 1, 2018 through November 30, 2018 263 18.18 — 1,136,091December 1, 2018 through December 31, 2018 2,264 17.58 — 1,349,996Total 2,793 $17.99 — ________________________(1) Represents the surrender of shares of our common stock withheld by us to satisfy the minimum tax withholding obligations in connection with thevesting of restricted stock units held by our employees.(2) We did not repurchase shares of our common stock during the fourth quarter of 2018. We have repurchased and retired $39.5 million cumulativelyof our common stock under our share repurchase program to date. These shares were purchased pursuant to a repurchase program authorized by ourBoard of Directors that was announced in January 2016 to repurchase up to $60.0 million of our common stock, of which $20.5 million remainsoutstanding as of December 31, 2018. The repurchase program does not have an expiration date and may be suspended for periods or discontinuedat any time.Securities Authorized for Issuance Under Equity Compensation PlansSee Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans. Such information is incorporatedby reference to our definitive proxy statement pursuant to Regulation 14A, which we intend to file with the U.S. Securities and Exchange Commission (the“SEC”) not later than 120 days after the close of our year ended December 31, 2018.63Table of ContentsFive‑Year Comparative Stock PerformanceThe following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock with the cumulative totalreturn on the NASDAQ Global Select Market Index and the NASDAQ Biotechnology Index over the past five years. The comparisons assume $100 wasinvested on December 31, 2013 in our common stock, the NASDAQ Global Select Market Index and the NASDAQ Biotechnology Index, and assumesreinvestment of dividends, if any. 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018AMAG Pharmaceuticals, Inc.100.00 175.54 124.34 143.33 54.57 62.56NASDAQ Global Select Market Index100.00 116.05 121. 131.51 170.67 163.02NASDAQ Biotechnology Index100.00 131.71 140.56 112.25 133.67 121.24The stock price performance shown in this performance graph is not indicative of future price performance. Information used in the graph was obtainedfrom Research Data Group, Inc., a source we believe is reliable.The material in this section captioned Five-Year Comparative Stock Performance is being furnished and shall not be deemed “filed” with the SEC forpurposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this section be deemed to beincorporated by reference in any registration statement or other document filed with the SEC under the Securities Act of 1933, except to the extent wespecifically and expressly incorporate it by reference into such filing.64Table of ContentsITEM 6. SELECTED FINANCIAL DATA:The following table sets forth selected financial data as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014. The selectedfinancial data set forth below has been derived from our audited financial statements. This information should be read in conjunction with the financialstatements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K and Management’s Discussion and Analysis ofFinancial Condition and Results of Operations included in Part II, Item 7 of this Annual Report on Form 10-K. Years Ended December 31, 2018 2017 2016 2015 2014 (in thousands, except per share data)Statements of Operations Data Continuing Operations: Revenues: Product sales, net$473,852 $495,645 $432,170 $341,816 $109,998Other revenues (1)150 124 317 52,328 14,386Total revenues474,002 495,769 432,487 394,144 124,384Costs and expenses: Cost of product sales (2)215,892 161,349 96,314 78,509 20,306Research and development expenses44,846 75,017 65,561 42,710 24,160Acquired in-process research and development (3)32,500 65,845 — — —Selling, general and administrative expenses (4)227,810 178,151 169,468 131,127 72,254Impairment of intangible assets (5)— 319,246 15,724 — —Acquisition-related costs— — — 11,232 9,478Restructuring expenses— — 341 2,274 2,023Total costs and expenses521,048 799,608 347,408 265,852 128,221Operating (loss) income(47,046) (303,839) 85,079 128,292 (3,837)Other income (expense): Interest expense(51,971) (68,382) (73,153) (53,251) (14,697)Loss on debt extinguishment (6)(35,922) (10,926) — (10,449) —Interest and dividend income5,328 2,810 3,149 1,501 975Other (expense) income(74) (70) 189 (9,173) 217Total other expense(82,639) (76,568) (69,815) (71,372) (13,505)(Loss) income from continuing operations before income taxes(129,685) (380,407) 15,264 56,920 (17,342)Income tax expense (benefit) (7)39,654 (175,254) 13,171 12,764 (153,159)Net (loss) income from continuing operations$(169,339) $(205,153) $2,093 $44,156 $135,817 Discontinued operations: Income (loss) from discontinued operations$18,873 $10,313 $(6,209) $(17,076) $—Gain on sale of CBR business87,076 — — — —Income tax expense (benefit)2,371 4,388 (1,633) (5,699) —Net income (loss) from discontinued operations103,578 5,925 (4,576) (11,377) —Net (loss) income$(65,761) $(199,228) $(2,483) $32,779 $135,817 Basic net (loss) income per share: (Loss) income from continuing operations$(4.92) $(5.88) $0.06 $1.40 $6.06Income (loss) from discontinued operations3.01 0.17 (0.13) (0.36) —Total$(1.91) $(5.71) $(0.07) $1.04 $6.0665Table of Contents Diluted net (loss) income per share: (Loss) income from continuing operations$(4.92) $(5.88) $0.06 $1.25 $5.45Income (loss) from discontinued operations3.01 0.17 (0.13) (0.32) —Total$(1.91) $(5.71) $(0.07) $0.93 $5.45 Weighted average shares outstanding used to compute net (loss)income per share: Basic34,394 34,907 34,346 31,471 22,416Diluted34,394 34,907 34,833 35,308 25,225 As of December 31, 2018 2017 2016 2015 2014Balance Sheet Data Cash, cash equivalents and investments$394,171 $299,448 $527,130 $456,359 $144,186Working capital (current assets less current liabilities)$359,726 $204,150 $405,681 $360,753 $107,548Total assets (8)$1,175,459 $1,900,356 $2,478,426 $2,476,210 $1,388,933Long-term liabilities (9)$263,360 $832,394 $1,231,160 $1,298,025 $762,492Stockholders’ equity$746,655 $790,244 $934,389 $932,264 $459,953________________________(1) In 2015, we recognized $44.4 million in revenues associated with the amortization of the remaining deferred revenue balance as a result of thetermination of a license, development and commercialization agreement (the “Takeda Termination Agreement”) with Takeda Pharmaceutical CompanyLimited (“Takeda”) and $6.7 million of additional revenues related to payments made by Takeda upon the final termination date under the terms of theTakeda Termination Agreement.(2) Cost of product sales in 2018, 2017, 2016, 2015, and 2014 included approximately $158.4 million, $130.4 million, $77.8 million, $63.3 million, and$6.1 million of non-cash expense related to the amortization of intangible assets and the step-up of Lumara Health’s inventories at the acquisition date,respectively.(3) 2018 reflects $12.5 million paid in connection with our acquisition of AMAG-423 and $20.0 million paid to Palatin Technologies, Inc. upon FDAacceptance of the Vyleesi NDA. 2017 reflects $65.8 million related to a $60.0 million one-time upfront payment under the terms of the Palatin LicenseAgreement and $5.8 million, which represented a portion of the consideration recorded in 2017 under the terms of the Endoceutics License Agreement.(4) 2018 and 2017 reflect increases driven by organizational growth associated with significant launch activities for multiple products and costs related tothe commercialization of Intrarosa. 2016 reflects an increase in the Makena-related contingent consideration based on the expected timing of milestonepayments. In addition, 2015 reflects a full year recognition of Makena-related selling, general and administrative expenses compared to a partial periodin 2014 following our November 2014 acquisition of Lumara Health.(5) In 2017, we recognized a $319.2 million impairment charge related to the Makena base technology intangible asset. In 2016, we recognized $15.7million of charges related to the impairment of the remaining net intangible asset for the MuGard Rights.(6) Reflects $35.9 million, $10.9 million and $10.4 million loss on debt extinguishment in 2018, 2017 and 2015, respectively, due to the early redemptionof a $500.0 million aggregate principal amount of 7.875% Senior Notes due 2023 (the “2023 Senior Notes”), the early repayment of a 2015 term loanfacility and the early repayment of a 2014 term loan facility, respectively.(7) The $175.3 million income tax benefit in 2017 was primarily driven by the deferred tax benefit related to the Makena base technology intangible assetimpairment and amortization. The $153.2 million income tax benefit in 2014 reflects a $132.9 million decrease in our valuation allowance due totaxable temporary differences available as a source of income to66Table of Contentsrealize the benefit of certain of our pre-existing deferred tax assets as a result of the acquisition of Lumara Health.(8) Reflects the acquisition of CBR during 2015, the recognition of a $319.2 million impairment charge related to the Makena base technology intangibleasset in 2017 and the sale of the CBR business in 2018.(9) Long-term liabilities increased in 2015 as a result of the borrowing against the 2023 Senior Notes and decreased in 2017 and 2018 primarily due to therepayment of our term loan facilities and the 2023 Senior Notes, respectively.67Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:OverviewAMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative productsto patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across arange of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia managementand cancer supportive care, including Feraheme® (ferumoxytol injection) for intravenous (“IV”) use, Makena® (hydroxyprogesterone caproate injection),Intrarosa® (prasterone) vaginal inserts and MuGard® Mucoadhesive Oral Wound Rinse. In addition to our marketed products, our portfolio includes threeproduct candidates, Vyleesi™ (bremelanotide), which is being developed for the treatment of hypoactive sexual desire disorder (“HSDD”) in pre-menopausalwomen, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studiedas an anticoagulant reversal agent.On February 7, 2019, we announced that we combined our women's and maternal health sales forces into one integrated sales team. This combined salesforce will promote both Intrarosa and Makena and will provide healthcare professionals with one commercial point of contact and seeks to maximizeefficiency and effectiveness for the promotion of our commercial products. As a result, we reduced our overall headcount by approximately 110 employees,approximately 100 of whom were part of our field-based commercial organization with the remainder coming from our general and administrative functions.We expect to record a one-time restructuring charge of approximately $6.0 million, primarily related to severance and related benefits, in the first quarter of2019.On January 16, 2019, we acquired ciraparantag with our acquisition of Perosphere Pharmaceuticals Inc. (“Perosphere”), a privately-heldbiopharmaceutical company pursuant to an Agreement and Plan of Merger. Ciraparantag is an anticoagulant reversal agent in development for patientstreated with novel oral anticoagulants (“NOACs”) or low molecular weight heparin (“LMWH”) when reversal of the anticoagulant effect of these products isneeded for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. For additional information on the Perosphereacquisition, see Note W, “Subsequent Events,” to our consolidated financial statements included in this Annual Report on Form-10-K.We intend to continue to expand the impact of our current and future products for patients by delivering on our growth strategy, which includescollaborating on and acquiring promising therapies at various stages of development, and advancing them through the clinical and regulatory process todeliver new treatment options to patients. Our primary sources of revenue are from sales of Makena, Feraheme and Intrarosa. Except as otherwise stated below,the following discussions of our results of operations reflect the results of our continuing operations, excluding the results related to the CBR business, whichwe sold in August 2018. The CBR business has been separated from continuing operations and reflected as a discontinued operation. See Note C,“Discontinued Operations and Held for Sale,” to our consolidated financial statements included in this Annual Report on Form 10-K.AMAG’s Portfolio of Products and Product CandidatesFerahemeFeraheme received approval from the U.S. Food and Drug Administration (the “FDA”) in June 2009 for the treatment of iron deficiency anemia (“IDA”)in adult patients with chronic kidney disease (“CKD”). In February 2018, the FDA approved the supplemental New Drug Application to expand the label toinclude all eligible adult IDA patients who have intolerance to oral iron or have had unsatisfactory response to oral iron in addition to patients who haveCKD. IDA is prevalent in many different patient populations, such as patients with CKD, gastrointestinal diseases or disorders, inflammatory diseases,chemotherapy-induced anemia and abnormal uterine bleeding. For many of these patients, treatment with oral iron is unsatisfactory or is not tolerated. It isestimated that approximately five million people in the U.S. have IDA and we estimate that a small fraction of the patients who are diagnosed with IDAregardless of the underlying cause are currently being treated with IV iron.68Table of ContentsThe expanded Feraheme label was supported by two positive pivotal Phase 3 trials, which evaluated Feraheme versus iron sucrose or placebo in a broadpopulation of patients with IDA and positive results from a third Phase 3 randomized, double-blind non-inferiority trial that evaluated the incidence ofmoderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension with Feraheme compared to Injectafer® (ferriccarboxymaltose injection) (the “Feraheme comparator trial”). The Feraheme comparator trial demonstrated comparability to Injectafer® based on the primarycomposite endpoint of the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension(Feraheme incidence 0.6%; Injectafer® incidence 0.7%). Adverse event rates were similar across both treatment groups; however, the incidence of severehypophosphatemia (defined by blood phosphorous of <0.2 mg/dl at week 2) was less in the patients receiving Feraheme (0.9% of patients) compared to thosereceiving Injectafer® (50.8% of patients).MakenaMakena is indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth.We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) in November 2014.Makena was approved by the FDA in February 2011 as an intramuscular (“IM”) injection (the “Makena IM product”) packaged in a multi-dose vial andin February 2016 as a single-dose preservative-free vial. The orphan drug exclusivity period that was granted to the Makena IM product in 2011 expired inFebruary 2018. In February 2018, the Makena auto-injector was approved by the FDA for administration via a pre-filled subcutaneous auto-injector, a drug-device combination product (the “Makena auto-injector”). The Makena auto-injector offers an alternative administration option for patients and providersand was designed with features, such as a shorter, thinner, non-visible needle compared to the Makena IM product, to help address some of the known barriersto treatment of recurrent preterm birth, including the lack of patient acceptance and adherence. Our commercial strategy for Makena currently focuses ondriving awareness of the availability and attributes of the Makena auto-injector and converting current IM prescribers to the Makena auto-injector.In July 2018, simultaneously with the launch of the first generic competitor to Makena, we launched our own authorized generic of both the single- andmulti-dose vials through our generic partner, Prasco, LLC (the “Makena authorized generic”). As a result of this partnership, we are able to provide patientsand healthcare providers with access to therapeutically equivalent versions of the branded Makena IM injection. Currently, there are two generic competitorsin the market in addition to the Makena authorized generic product, and we expect additional generic entrants to enter the market in 2019 to compete againstboth the 1ml and 5ml presentations.IntrarosaIn February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics, Inc. (“Endoceutics”) pursuant to whichEndoceutics granted us the U.S. rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexualintercourse), a symptom of vulvar and vaginal atrophy (“VVA”), due to menopause. Intrarosa was approved by the FDA in November 2016 and was launchedcommercially in July 2017.Intrarosa is the only FDA-approved vaginal non-estrogen treatment indicated for the treatment of moderate to severe dyspareunia, a symptom of VVA,due to menopause. Intrarosa contains prasterone, a synthetic form of dehydroepiandrosterone, which is an inactive endogenous (i.e. occurring in the body)sex steroid. Prasterone is converted by enzymes in the body into androgens and estrogens to help restore the vaginal tissue as indicated by improvements inthe percentage of superficial cells, parabasal cells, and pH. The mechanism of action of Intrarosa is not fully established. The effectiveness of Intrarosa onmoderate to severe dyspareunia in post-menopausal women was examined in two primary 12-week placebo-controlled efficacy trials. Women who usedIntrarosa in these trials experienced a significant reduction in moderate to severe dyspareunia, as well as statistically significant improvements in thepercentage of vaginal superficial cells, parabasal cells and vaginal pH. In these trials, vaginal discharge and atypical pap smears were the most commonadverse reactions. Intrarosa is contraindicated in women with undiagnosed abnormal genital bleeding. The label for Intrarosa contains a precaution that it hasnot been studied in women with a history of breast cancer.In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women, which is nowfully enrolled. Upon review of the full data set, it will be determined whether to continue to pursue an additional clinical trial to support an eventual filingwith the FDA for an HSDD indication. We have agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding upto $20.0 million, of which we have paid approximately $6.0 million. Additional details regarding the Endoceutics License Agreement can be found in NoteQ,69Table of Contents“Collaboration, License and Other Strategic Agreements,” to our consolidated financial statements included in this Annual Report on Form 10-K.VyleesiIn January 2017, we entered into a license agreement (the “Palatin License Agreement”) with Palatin Technologies, Inc. (“Palatin”) pursuant to which weacquired Vyleesi, an investigational product designed to treat acquired generalized HSDD in pre-menopausal women. In June 2018, the FDA accepted theVyleesi NDA. The Prescription Drug User Fee Act (“PDUFA”) date for completion of FDA review of the Vyleesi NDA is June 23, 2019, and if approved onthat date, we expect to launch Vyleesi in the second half of 2019. In November 2018, as part of our discussions with the FDA regarding its review of the NDAsubmission for Vyleesi, the FDA requested additional data assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi. This Phase 1study is ongoing and is being conducted in premenopausal healthy volunteers. We believe that this study can be conducted and data submitted prior to theJune 23, 2019 PDUFA date.Vyleesi, a melanocortin 4 receptor agonist is designed to be an on demand therapy used in anticipation of sexual activity and self-administered bypremenopausal women with HSDD in the thigh or abdomen via a single-use subcutaneous auto-injector. Two identically-designed Phase 3 studies evaluatingthe safety and efficacy of Vyleesi compared to placebo were conducted by Palatin for the treatment of HSDD in pre-menopausal women. Both trials consistedof a 24-week double-blind, placebo-controlled, randomized parallel group core study phase, comparing a subcutaneous dose of 1.75 mg Vyleesi versusplacebo, self-administered via an auto-injector, on demand, and patients were equally randomized (1:1 ratio) to either Vyleesi or placebo. The co-primaryendpoints for these trials were evaluated using patient self-reported scores from Question One and Two of the Female Sexual Function Index: Desire Domain(“FSFI-D”) and Question 13 from the Female Sexual Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”). Women who completed the randomized controlcore study phase of either study had the option to continue in an ongoing open-label safety extension phase of the study for an additional 52 weeks, whichgathered additional data on the safety of long-term and repeated use of Vyleesi. Nearly 80% of patients who completed the randomized portion of the studyelected to remain in the open-label portion of the study. All of the patients in the extension study received Vyleesi.Both studies met the pre-specified co-primary efficacy endpoints of improvement in low sexual desire and decrease in related distress as measured usingvalidated patient-reported outcome instruments. For women taking Vyleesi compared to placebo, the change from baseline in low sexual desire, as measuredby the FSFI-D, showed statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3 studies. The medianchange from baseline was 0.60 vs. 0.00 for both studies, and the mean change from baseline was 0.54 vs. 0.24 (p=0.0002) for one study and 0.63 vs. 0.21(p<0.0001) for the other study. Likewise, for women taking Vyleesi compared to placebo, the change from baseline in related distress, as measured by theFSDS-DAO Question 13, also demonstrated statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3studies. The median change from baseline was -1.0 vs. 0.0 for both studies, and the mean change from baseline was -0.7 vs. -0.4 for both studies, with pValuesof <0.0001for one study and 0.0053 for the other study. The change in the number of satisfying sexual events, a key secondary endpoint, was notsignificantly different from placebo in either clinical trial.In the Phase 3 clinical trials, the most frequent adverse events were nausea, flushing, injection site reactions and headache, which were generally mild-to-moderate in severity and were transient. Approximately 18% of patients discontinued participation in the Vyleesi arm due to adverse events in both studiesversus 2% in placebo. The adverse events in the extension portion of the study were consistent with that of the controlled studies described above.AMAG-423In September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 withVelo Bio, LLC, a privately-held life sciences company (“Velo”). AMAG-423 is a polyvalent antibody currently in development for the treatment of severepreeclampsia in pregnant women and has been granted both orphan drug and Fast Track designations by the FDA. AMAG-423 is intended to bind toendogenous digitalis-like factors (“EDLFs”) and remove them from the circulation. EDLFs appear to be elevated in preeclampsia and may play an importantrole in the pathogenesis of preeclampsia. By decreasing EDLFs, AMAG-423 is believed to improve vascular endothelial function and lead to better post-delivery outcomes in affected mothers and their babies.In connection with the exercise of the option and the consummation of the acquisition, we paid Velo an upfront option exercise fee of $12.5 million inSeptember 2018. We are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of the product. In addition, we are obligated to paysales milestone payments to Velo of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and$900.0 million and low-single digit70Table of Contentsroyalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velo with a third-party, including a$5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterlyinstallments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-single digitroyalties based on net sales. See Note P, “Commitments and Contingencies,” to our consolidated financial statements included in this Annual Report on Form10-K for more information on the AMAG-423 acquisition.We have assumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of thefuture clinical, regulatory and other costs required to pursue FDA approval. Approximately 200 antepartum women with severe preeclampsia between 23 and32 weeks gestation will be enrolled in the multi-center, randomized, double-blind, placebo-controlled, parallel-group Phase 2b/3a study. We have re-initiatedthe study as the sponsor, and have begun reactivating the current sites, seeking new sites and, as of January 2019, enrolling new patients. Participants in thestudy receive either AMAG-423 or placebo intravenously four times a day over a maximum of four days. The study’s primary endpoint is to demonstrate areduction in the percentage of babies who develop severe intraventricular hemorrhage (bleeding in the brain), necrotizing enterocolitis (severe inflammationof the infant bowels) or death by 36 weeks corrected gestational age between the AMAG-423 and placebo arms. Secondary endpoints include the changefrom baseline in maternal creatinine clearance, maternal incidence of pulmonary edema during treatment and the period of time between treatment anddelivery. In an effort to accelerate enrollment, we intend to increase the number of trial sites, including potentially initiating sites outside of the U.S., and aretargeting to complete enrollment of the Phase 2b/3a study by the end of 2019. Ciraparantag In January 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small moleculeanticoagulant reversal agent in development as a single dose solution that is delivered intravenously to reverse the effects of certain NOACs(Xarelto®(rivaroxaban), Eliquis®(apixaban), and Savaysa®(edoxaban), as well as Lovenox® (enoxaparin sodium injection), a LMWH), when reversal of theanticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. Ciraparantaghas been granted Fast Track designation by the FDA and we intend to seek orphan drug designation and Breakthrough Therapy designation in 2019. SeeNote W, “Subsequent Events,” to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.Ciraparantag has been evaluated in more than 250 healthy volunteers across seven clinical trials. A first in human Phase 1 study evaluated the safety,tolerability, pharmacokinetic, and pharmacodynamic effects of ciraparantag alone and following a single dose of Savaysa®, and another Phase 1 studyevaluated the overall metabolism of the drug. Two Phase 1/2 studies evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects relatedto the reversal of unfractionated heparin and Lovenox® and three Phase 2b randomized, single-blind, placebo-controlled dose-ranging studies evaluated thereversal of Savaysa®, Eliquis®, and Xarelto® to assess the safety and efficacy of ciraparantag, each of which included 12 subjects dosed with ciraparantag. ThePhase 2b studies to reverse Xarelto® and Eliquis® are currently ongoing; however, both studies are approximately two-thirds complete, with the low dosecohort expected to finish in the first half of 2019. In these Phase 2b clinical trials, ciraparantag or placebo was administered to healthy volunteers in a blindedfashion after achieving steady blood concentrations of the respective anticoagulant. Pharmacodynamic assessments of whole blood clotting time (“WBCT”),an important laboratory measure of clotting capacity, were sampled frequently for the first hour post study drug dose, and then periodically thereafter out to24 hours post administration of study drug. Key endpoints in the Phase 2 trials included mean change from baseline in WBCT and the proportion of subjectsthat returned to within 10% of their baseline WBCT. Subjects in these studies experienced a rapid and statistically significant (p<0.001) reduction in WBCTcompared to placebo as early as 15 minutes after the administration of ciraparantag in each of the four studies and the effect was sustained for 24 hours.Moreover, in both the Eliquis® and Xarelto® studies, 100% of subjects in the highest dose cohorts (180 mg of ciraparantag) were responders, as defined by areturn to within 10% of baseline WBCT within 30 minutes and sustained for at least six hours. Ciraparantag has been well tolerated in clinical trials, with themost common related adverse events to date being mild sensations of coolness, warmth or tingling, skin flushing, and alterations in taste. There have been nodrug-related serious adverse events to date. Following the completion of the Phase 2b studies, we plan to conduct an End of Phase 2 meeting with the FDA toconfirm the design of our Phase 3a trials in healthy volunteers, designed to determine the lowest effective dose of ciraparantag.We intend to initiate the Phase3a trials in the second half of 2019.MuGardMuGard is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oralwounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures orbraces. We acquired the U.S. commercial rights71Table of Contentsto MuGard under a June 2013 license agreement with Abeona Therapeutics, Inc. (“Abeona”) (the “MuGard Rights”). MuGard was launched in the U.S. byAbeona in 2010 after receiving 510(k) clearance from the FDA.Critical Accounting PoliciesOur management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, whichhave been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requiresmanagement to make certain estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosureof contingent assets and liabilities. Actual results could differ materially from those estimates. Management employs the following critical accountingpolicies affecting our most significant estimates and assumptions: revenue recognition and related sales allowances and accruals; valuation of marketablesecurities; business combinations and asset acquisitions, including acquisition-related contingent consideration; goodwill; intangible assets; equity-basedcompensation; and income taxes.Revenue and AllowancesOn January 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) applyingthe modified retrospective transition method to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning afterJanuary 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards ineffect for prior periods. The adoption of ASC 606 did not have an impact on the pattern or timing of recognition of our product revenue, as the majority of ourproduct revenue continues to be recognized when the customer takes control of our product.Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the considerationwhich we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within thescope of ASC 606, we perform the following five steps:a.Identify the contract(s) with a customer;b.Identify the performance obligations in the contract;c.Determine the transaction price;d.Allocate the transaction price to the performance obligations in the contract; ande.Recognize revenue when (or as) the performance obligations are satisfied.We only apply the five step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods orservices we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or servicespromised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We thenrecognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation issatisfied.Our major sources of revenue during the reporting periods were product revenues from Makena (including both our branded and unbranded products),Feraheme and Intrarosa. The adoption of ASC 606 did not have an impact on our product revenue.We receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to considerationbecomes unconditional.Performance Obligations and Product RevenueAt contract inception, we assess the goods promised in our contracts with customers and identify a performance obligation for each promise to transfer tothe customer a good (or bundle of goods) that is distinct. To identify the performance obligations, we consider all of the goods promised in the contractregardless of whether they are explicitly stated or are implied by customary business practices. We determined that the following distinct goods representseparate performance obligations:•Supply of Makena (branded and unbranded) product•Supply of Feraheme product•Supply of Intrarosa productWe principally sell our products to wholesalers, specialty distributors, specialty pharmacies and other customers, including our authorized genericpartner (collectively, “Customers”), who purchase products directly from us. Our Customers72Table of Contentssubsequently resell the products to healthcare providers and patients. In addition to distribution agreements with Customers, we enter into arrangements withhealthcare providers and payers that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to thepurchase of our products.For the majority of our Customers, we transfer control at the point in time when the goods are delivered. In instances when we perform shipping andhandling activities, these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collectedfrom Customers and remitted to governmental authorities are excluded from revenues.Variable ConsiderationUnder ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks,discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers.In addition, we estimate variable consideration related to our share of net distributable profits from our authorized generic partner. Variable considerationmust be determined using either an “expected value” or a “most likely amount” method.We record product revenues net of certain allowances and accruals in our consolidated statements of operations. Product sales allowances and accrualsare primarily comprised of both direct and indirect fees, discounts and rebates and provisions for estimated product returns. Direct fees, discounts and rebatesare contractual fees and price adjustments payable to Customers that purchase products directly from us. Indirect fees, discounts and rebates are contractualprice adjustments payable to healthcare providers and organizations, such as certain physicians, clinics, hospitals, group purchasing organizations (“GPOs”),and dialysis organizations that typically do not purchase products directly from us but rather from wholesalers and specialty distributors. Considerationpayable to a Customer, or other parties that purchase goods from a Customer, are considered to be a reduction of the transaction price, and therefore, ofrevenue.Product sales allowances and accruals are based on definitive contractual agreements or legal requirements (such as laws and regulations to providemandatory discounts for sales to government entities) related to the purchase and/or utilization of the product by these entities and are recorded in the sameperiod that the related revenue is recognized. We use the expected value method for estimating variable consideration. We estimate product sales allowancesand accruals using either historical, actual and/or other data, including estimated patient usage, applicable contractual rebate rates, contract performance bythe benefit providers, other current contractual and statutory requirements, historical market data based upon experience of our products and other productssimilar to them, specific known market events and trends such as competitive pricing and new product introductions, current and forecasted Customer buyingpatterns and inventory levels, and the shelf life of our products. As part of this evaluation, we also review changes to federal and other legislation, changes torebate contracts, changes in the level of discounts, and changes in product sales trends. Although allowances and accruals are recorded at the time of productsale, rebates are typically paid out in arrears, one month to three months months after the sale. The estimate of variable consideration, which is included in the transaction price, may be constrained and is included in the net sales price only to theextent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated withthe variable consideration is subsequently resolved in a future period. Estimating variable consideration and the related constraint requires the use ofsignificant management judgment and actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future varyfrom our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.DiscountsWe typically offer a 2% prompt payment discount to certain customers as an incentive to remit payment in accordance with the stated terms of theinvoice, generally 30 days. Because we anticipate that those customers who are offered this discount will take advantage of the discount, 100% of the promptpayment discount at the time of sale is accrued for eligible customers, based on the gross amount of each invoice. We adjust the accrual quarterly to reflectactual experience.73Table of ContentsChargebacksChargeback reserves represent the estimated obligations resulting from the difference between the prices at which we sell our products to wholesalers andthe sales price ultimately paid to wholesalers under fixed price contracts by third-party payers, including governmental agencies. The chargeback estimatesare determined based on actual product sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at the time of resale tothe qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification from the wholesaler.Estimated chargeback amounts are recorded at the time of sale and adjusted quarterly to reflect actual experience.Distributor/Wholesaler and Group Purchasing Organization FeesFees under arrangements with distributors and wholesalers are usually based upon units of product purchased during the prior month or quarter and areusually paid by us within several weeks of the receipt of an invoice from the wholesaler or distributor, as the case may be. Fees under arrangements with GPOsare usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 days after period end. In accordance withASC 606, since the consideration given to the Customer is not for a distinct good or service, the consideration is a reduction of the transaction price of thevendor’s products or services. We generally pay such amounts within several weeks of the receipt of an invoice from the distributor, wholesaler or GPO.Accordingly, we accrue the estimated fee due at the time of sale, based on the contracted price invoiced to the Customer. We adjust the accrual quarterly toreflect actual experience.Product ReturnsConsistent with industry practice, we generally offer wholesalers, specialty distributors and other customers a limited right to return our products basedon the product’s expiration date. The current shelf-lives or time between manufacture and expiration for products in our portfolio range from three years tofive years. Product returns are estimated based on the historical return patterns and known or expected changes in the marketplace. We track actual returns byindividual production lots. Returns on lots eligible for credits under our returned goods policy are monitored and compared with historical return trends andrates. We expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the product, the expense to store ourproducts, and/or that our products are readily available for distribution. We record an estimate of returns at the time of sale. If necessary, our estimated rate ofreturns may be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. There were no materialadjustments to our reserve for product returns during the years ended December 31, 2018, 2017 or 2016. To date, our product returns have been relativelylimited; however, returns experience may change over time. We may be required to make future adjustments to our product returns estimate, which wouldresult in a corresponding change to our net product sales in the period of adjustment and could be significant.Sales RebatesWe contract with various private payer organizations, primarily pharmacy benefit managers, for the payment of rebates with respect to utilization of ourproducts. We determine our estimates for rebates, if applicable, based on actual product sales data and our historical product claims experience. Rebateamounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks of notification by the provider. Weregularly assess our reserve balance and the rate at which we accrue for claims against product sales. If we determine in future periods that our actual rebateexperience is not indicative of expected claims, if actual claims experience changes, or if other factors affect estimated claims rates, we may be required toadjust our current accumulated reserve estimate, which would affect net product sales in the period of the adjustment and could be significant.Governmental RebatesGovernmental rebates relate to our reimbursement arrangements with state Medicaid programs. We determine our estimates for Medicaid rebates, ifapplicable, based on actual product sales data and our historical product claims experience. In estimating these reserves, we provide for a Medicaid rebateassociated with both those expected instances where Medicaid will act as the primary insurer as well as in those instances where we expect Medicaid will actas the secondary insurer. Rebate amounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks ofnotification by the Medicaid or provider entity. We regularly assess our Medicaid reserve balance and the rate at which we accrue for claims against productsales. If we determine in future periods that our actual rebate experience is not indicative of expected claims, if actual claims experience changes, or if otherfactors affect estimated claims rates, we may be required to adjust our current Medicaid accumulated reserve estimate, which would affect net product sales inthe period of the adjustment and could be significant.74Table of ContentsOther DiscountsOther discounts which we offer include voluntary patient assistance programs, such as copay assistance programs, which are intended to providefinancial assistance to qualified commercially insured patients with prescription drug copayments required by payers. The calculation of the accrual forcopay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized asrevenue.Marketable SecuritiesWe account for and classify our marketable securities as either “available-for-sale,” “held-to-maturity,” or “trading debt securities,” in accordance withthe accounting guidance related to the accounting and classification of certain investments in marketable securities. The determination of the appropriateclassification by us is based primarily on management’s ability and intent to sell the debt security at the time of purchase. As of December 31, 2018 and2017, all of our marketable securities were classified as available-for-sale.Available-for-sale securities are those securities which we view as available for use in current operations, if needed. We generally classify our available-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheet date. Available-for-sale marketable securities are stated at fair value with their unrealized gains and losses included in accumulated other comprehensive income (loss) withinthe consolidated statements of stockholders’ equity, until such gains and losses are realized in other income (expense) within the consolidated statements ofoperations or until an unrealized loss is considered other-than-temporary.We recognize other-than-temporary impairments of our marketable securities when there is a decline in fair value below the amortized cost basis and if(a) we have the intent to sell the security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized costbasis. If either of these conditions is met, we recognize the difference between the amortized cost basis of the security and its fair value at the impairmentmeasurement date in our consolidated statements of operations. If neither of these conditions is met, we must perform additional analysis to evaluate whetherthe unrealized loss is associated with the creditworthiness of the issuer of the security rather than other factors, such as interest rates or market factors. If wedetermine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, theimpairment is considered other-than-temporary and is recognized in our consolidated statements of operations.Business Combinations and Asset AcquisitionsThe purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price tothe identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Under Accounting Standards Update(“ASU”) No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business, we first determine whether substantially all of the fairvalue of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single assetor group of assets, as applicable, is not a business.We account for acquired businesses using the acquisition method of accounting, under which the total purchase price of an acquisition is allocated to thenet tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired isrecorded as goodwill.The purchase price allocations are initially prepared on a preliminary basis and are subject to change as additional information becomes availableconcerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocations are made as soon aspracticable but no later than one year from the acquisition date.Acquired inventory is recorded at its fair value, which may require a step-up adjustment to recognize the inventory at its expected net realizable value.The inventory step-up is recorded to cost of product sales in our consolidated statements of operations when related inventory is sold, and we record step-upcosts associated with clinical trial material as research and development expense.75Table of ContentsAcquisition-Related Contingent ConsiderationContingent consideration arising from a business combination is included as part of the purchase price and is recognized at its estimated fair value as ofthe acquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until thecontingency is resolved. These changes in fair value are recognized in selling, general and administrative expenses in our consolidated statements ofoperations. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time. Forasset acquisitions, we record contingent consideration for obligations we consider to be probable and estimable and these liabilities are not adjusted to fairvalue.GoodwillWe test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is morelikely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairmentassessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in marketcapitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator. Ourannual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.In performing our goodwill impairment tests during 2018 and 2017, we utilized the approach prescribed under ASC 350, as amended by ASU 2017-04,Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires that an entity perform its annual, or interim,goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for theamount by which the carrying amount exceeds the reporting unit’s fair value.When we perform any goodwill impairment test, the estimated fair value of our reporting unit is determined using an income approach that utilizes adiscounted cash flow (“DCF”) model or, a market approach, when appropriate, which assesses our market capitalization as adjusted for a control premium, ora combination thereof. The DCF model is based upon expected future after-tax operating cash flows of the reporting unit discounted to a present value usinga risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning (i) future operating performance,including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving theestimated cash flows (ii) the probability of regulatory approvals, and (iii) future economic conditions, all of which may differ from actual future cash flows.These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. Thediscount rate, which is intended to reflect the risks inherent in future cash flow projections, used in the DCF model, is based on estimates of the weightedaverage cost of capital (“WACC”) of market participants relative to our reporting unit. Financial and credit market volatility can directly impact certaininputs and assumptions used to develop the WACC. Any changes in these assumptions may affect our fair value estimate and the result of an impairment test.We believe the discount rates and other inputs and assumptions are consistent with those that a market participant would use. In addition, in order to assessthe reasonableness of the fair value of our reporting unit as calculated under the DCF model, we also compare the reporting unit’s fair value to our marketcapitalization and calculate an implied control premium (the excess sum of the reporting unit’s fair value over its market capitalization). We evaluate theimplied control premium by comparing it to control premiums of recent comparable market transactions, as applicable. Throughout 2017, at points during2018 and as of December 31, 2018 and 2017, our market capitalization was lower than our stockholders’ equity, or book value. We believe that a marketparticipant buyer would be required to pay a control premium for our business that would cover the difference between our market capitalization and ourbook value.Assumptions related to revenue, growth rates and operating margin are based on management’s annual and ongoing forecasting, budgeting and planningprocesses and represent our best estimate of the future results of operations across the company as of that point in time. These estimates are subject to manyassumptions, such as the economic environment in which our reporting unit operates, expectations of regulatory approval of our products in development orunder review with the FDA, demand for our products and competitor actions. If we were to apply different assumptions, or if the outcome of regulatory orother developments, or actual demand for our products and competitor actions, are inconsistent with our assumptions, our estimated discounted future cashflows and the resulting estimated fair value of our reporting unit would increase or decrease, and could result in the fair value of our reporting unit being lessthan its carrying value in an impairment test.76Table of ContentsIntangible AssetsWe amortize our intangible assets that have finite lives based on either the straight-line method, or if reliably determinable, based on the pattern in whichthe economic benefit of the asset is expected to be utilized. When such facts and circumstances exist, management compares the projected undiscountedfuture cash flows associated with the asset over its estimated useful life against the carrying amount. The impairment loss, if any, is measured as the excess ofthe carrying amount of the asset over its fair value.If we acquire a business as defined under applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If we acquire anasset or a group of assets that do not meet the definition of a business, then the acquired IPR&D is expensed on its acquisition date. Future costs to developthese assets are recorded to research and development expense as they are incurred.Acquired IPR&D represents the fair value assigned to research and development assets that we acquire and have not been completed at the acquisitiondate. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheets at the acquisition-date fair value and isdetermined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the projects, anddiscounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or morefrequently if indicators of impairment are present, until the project is completed or abandoned. If we determine that IPR&D becomes impaired or isabandoned, the carrying value is written down to its fair value with the related impairment charge recognized in our consolidated statement of operations inthe period in which the impairment occurs. Upon successful completion of each project and launch of the product, we will make a separate determination ofthe estimated useful life of the IPR&D intangible asset and the related amortization will be recorded as an expense prospectively over its estimated useful life.The projected discounted cash flow models used to estimate our IPR&D reflect significant assumptions regarding the estimates a market participantwould make in order to evaluate a drug development asset, including the following:•Probability of successfully completing clinical trials and obtaining regulatory approval;•Market size, market growth projections, and market share;•Estimates regarding the timing of and the expected costs to advance our clinical programs to commercialization;•Estimates of future cash flows from potential product sales; and•A discount rate.Additionally, to the extent we acquire other indefinite-lived intangible assets through our business combinations, these assets are reviewed forimpairment on an annual basis or more frequently if indicators of impairment are present. If we determine that the asset becomes impaired, the carrying valueis written down to its fair value with the related impairment charge recognized in our consolidated statements of operations in the period in which theimpairment occurs.Equity-Based CompensationEquity-based compensation cost is generally measured at the estimated grant date fair value and recorded to expense over the requisite service period,which is generally the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we must make certainjudgments about whether employees, officers, directors, consultants and advisers will complete the requisite service period, and reduce the compensationexpense being recognized for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates. Forfeitures are estimated based upon historical experience and adjusted for unusual events such as corporaterestructurings, which can result in higher than expected turnover and forfeitures. If factors change and we employ different assumptions in future periods, thecompensation expense that we record in the future may differ significantly from what we have recorded in the current period.We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. This model requiresthe input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expected volatility of ourstock price over the expected option term and the expected dividend yield over the expected option term and are subject to various assumptions. The fairvalue of awards calculated using77Table of Contentsthe Black-Scholes option pricing model is generally amortized on a straight-line basis over the requisite service period, and is recognized based on theproportionate amount of the requisite service period that has been rendered during each reporting period.We estimate the fair value of our restricted stock units (“RSUs”) whose vesting is contingent upon market conditions, such as total shareholder return,using the Monte-Carlo simulation model. The fair value of RSUs where vesting is contingent upon market conditions is amortized based upon the estimatedderived service period. The fair value of RSUs granted to our employees and directors whose vesting is dependent on future service is determined based uponthe quoted closing market price per share on the date of grant, adjusted for estimated forfeitures.We believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees and directors. Ourequity award valuations are estimates and may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. Theseamounts are subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture ratesand the issuance of new equity-based awards.Income TaxesWe use the asset and liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized forthe estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax bases. A deferred tax asset is established for the expected future benefit of net operating loss (“NOL”) and credit carryforwards. Deferred taxassets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. Avaluation allowance against net deferred tax assets is required if, based on available evidence, it is more likely than not that some or all of the deferred taxassets will not be realized. Significant judgments, estimates and assumptions regarding future events, such as the amount, timing and character of income,deductions and tax credits, are required in the determination of our provision for income taxes and whether valuation allowances are required against deferredtax assets. In evaluating our ability to recover our deferred tax assets, we consider all available evidence, both positive and negative, including the existenceof taxable temporary differences, our past operating results, the existence of cumulative income in the most recent fiscal years, changes in the business inwhich we operate and our forecast of future taxable income. In determining future taxable income, we are responsible for assumptions utilized including theamount of state and federal operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.These assumptions require significant judgment about the forecasts of future taxable income. As of December 31, 2018, we have established a valuationallowance on our net deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporarydifferences would not be available as a source of income to realize the benefits of those deferred tax assets.We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation ofuncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to betaken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position. Weevaluate uncertain tax positions on a quarterly basis and adjust the level of the liability to reflect any subsequent changes in the relevant facts surroundingthe uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact our income taxprovision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in ourconsolidated statement of operations.Impact of Recently Issued and Proposed Accounting PronouncementsFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that areadopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effectivewill not have a material impact on our financial position or results of operations upon adoption. For further discussion on recent accounting pronouncements,please see Note U, “Recently Issued and Proposed Accounting Pronouncements,” to our consolidated financial statements included in this Annual Report onForm 10-K for additional information.78Table of ContentsResults of Operations - 2018 as compared to 2017 Revenues Total revenues for 2018 and 2017 consisted of the following (in thousands except for percentages): Years Ended December 31, 2018 to 2017 2018 2017 $ Change % ChangeProduct sales, net Makena$322,265 $387,158 $(64,893) (17)%Feraheme135,001 105,930 29,071 27 %Intrarosa16,218 1,816 14,402 >100 %MuGard368 741 (373) (50)%Total473,852 495,645 (21,793) (4)%Other revenues150 124 26 21 %Total revenues$474,002 $495,769 $(21,767) (4)% Our total revenues for 2018 decreased by $21.8 million as compared to 2017, due primarily to a $64.9 million decrease in Makena net sales, which wereimpacted by a supply disruption of our IM products and the entry of generic competition in 2018. This decrease was partially offset by an increase of $29.1million of Feraheme net sales following the approval of its expanded label in February 2018 and an increase of $14.4 million of Intrarosa net sales, which wascommercially launched in July 2017.We expect that sales of Feraheme, Intrarosa and the Makena auto-injector will increase in 2019 as compared to 2018. We expect overall revenues fromthe Makena IM products to continue to decline due to (i) volume and pricing pressure as a result of current generic competition to Makena, (ii) theexpectation of additional generic competitors in the market and (iii) continued manufacturing-related issues. As previously disclosed, we continue toexperience delays at our third-party manufacturer of the Makena IM product, which has resulted in our single-dose and multi-dose Makena IM vials beingout-of-stock as well as periodic supply disruptions and loss of market share for the authorized generic. We are attempting to mitigate this supply issue bymanufacturing at another supplier. The continued impact of generic competition to our Makena sales is dependent on the timing, number and behavior ofcurrent and future generic competitors.In 2019, we expect to recognize revenue related to milestone payments we may receive under the terms of a clinical trial collaboration agreement with aglobal pharmaceutical company, provided certain clinical obligations are met in connection with our ciraparantag Phase 3 program.The following table sets forth customers who represented 10% or more of our total revenues for 2018 and 2017: Years Ended December 31, 2018 2017AmerisourceBergen Drug Corporation27% 26%McKesson Corporation26% 24%79Table of ContentsTotal gross product sales were offset by product sales allowances and accruals for 2018 and 2017 as follows (in thousands except for percentages): Years Ended December 31, 2018 to 20172018 Percent ofgrossproduct sales 2017 Percent ofgrossproduct sales $ Change % ChangeGross product sales$974,330 $920,061 $54,269 6 %Provision for product sales allowances andaccruals: Contractual adjustments387,540 40% 310,588 34% 76,952 25 %Governmental rebates112,938 12% 113,828 12% (890) — %Total500,478 52% 424,416 46% 76,062 18 %Product sales, net$473,852 $495,645 $(21,793) (4)% The increase in contractual adjustments as a percentage of gross product sales primarily related to a higher mix of business through commercialreimbursement channels and additional discounts offered to commercial entities.Product Sales Allowances and AccrualsWe record product revenue net of certain allowances and accruals in our consolidated statements of operations. Our contractual adjustments includeprovisions for returns, pricing and prompt payment discounts, as well as wholesaler distribution fees, rebates to hospitals that qualify for 340B pricing, andvolume-based and other commercial rebates and other discounts. Governmental rebates relate to our reimbursement arrangements with state Medicaidprograms.We may refine our estimated revenue reserves as we continue to obtain additional experience or as our customer mix changes. If we determine in futureperiods that our actual experience is not indicative of our expectations, if our actual experience changes, or if other factors affect our estimates, we may berequired to adjust our allowances and accruals estimates, which would affect our net product sales in the period of the adjustment and could be significant.An analysis of the amount of our product reserves for 2018 and 2017, is as follows (in thousands): ContractualAdjustments GovernmentalRebates TotalBalance at January 1, 2017$47,600 $51,399 $98,999Current provisions relating to sales in current year314,537 112,167 426,704Adjustments relating to sales in prior years(3,949) 1,661 (2,288)Payments/returns relating to sales in current year(253,545) (61,569) (315,114)Payments/returns relating to sales in prior years(42,479) (53,060) (95,539)Balance at December 31, 2017$62,164 $50,598 $112,762Current provisions relating to sales in current year389,861 105,034 494,895Adjustments relating to sales in prior years(2,330) 7,903 5,573Payments/returns relating to sales in current year(333,694) (75,920) (409,614)Payments/returns relating to sales in prior years(58,802) (58,501) (117,303)Balance at December 31, 2018$57,199 $29,114 $86,31380Table of ContentsCosts and ExpensesCost of Product SalesCost of product sales for 2018 and 2017 were as follows (in thousands except for percentages): Years Ended December 31, 2018 to 2017 2018 2017 $ Change % ChangeCost of product sales$215,892 $161,349 $54,543 34%Percentage of net product sales46% 33% Our cost of product sales are primarily comprised of manufacturing costs, costs of managing our contract manufacturers, costs for quality assurance andquality control associated with our product sales, the amortization of product-related intangible assets, the inventory step-up in connection with theNovember 2014 acquisition of Lumara Health and royalty obligations. Amortization of intangible assets comprised $158.4 million and $130.4 million of the$215.9 million and $161.3 million cost of product sales for the years ended December 31, 2018 and 2017, respectively. The increase of $26.5 million in costof product sales not related to amortization of intangible assets was due to a larger portion of product sales from higher cost products as well as royaltyobligations related to the Makena auto-injector and Intrarosa products. We expect our cost of product sales, excluding amortization expense, to increase as a percentage of net product sales in 2019 as compared to 2018, dueto a shift toward products with higher royalty obligations, such as the Makena auto-injector and Intrarosa. Research and Development Expenses Research and development expenses include both external and internal expenses. External expenses primarily include costs of clinical trials and feespaid to contract research organizations (“CROs”), clinical supply and manufacturing expenses, regulatory filing fees, consulting and professional fees as wellas other general costs related to the execution of research and development activities. Internal expenses primarily include compensation of employeesengaged in research and development activities. Research and development expenses are expensed as incurred. Where possible, we track our external costsby major project. To the extent that external costs are not attributable to a specific project or activity, they are included in other external costs. Prior to theinitial regulatory approval of our products or development of new manufacturing processes, costs associated with manufacturing process development andthe manufacture of drug product are recorded as research and development expenses, unless we believe regulatory approval and subsequentcommercialization of the product candidate is probable and we expect the future economic benefit from sales of the product to be realized, at which point wecapitalize the costs as inventory.Research and development expenses for 2018 and 2017 consisted of the following (in thousands except for percentages): Years Ended December 31, 2018 to 2017 2018 2017 $ Change % ChangeExternal research and development expenses Vyleesi-related costs$11,053 $27,832 $(16,779) (60)%Makena-related costs5,312 12,971 (7,659) (59)%Feraheme-related costs4,143 7,699 (3,556) (46)%Intrarosa-related costs6,267 1,058 5,209 >100 %AMAG-423-related costs735 — 735 N/AOther external costs388 6,393 (6,005) (94)%Total27,898 55,953 (28,055) (50)%Internal research and development expenses16,948 19,064 (2,116) (11)%Total research and development expenses$44,846 $75,017 $(30,171) (40)% Total research and development expenses incurred in 2018 decreased by $30.2 million, or 40%, as compared to 2017. The $16.8 million decrease inVyleesi-related costs was attributable to costs incurred in 2017 in preparation for the March 2018 NDA submission, partially offset by increased costs in 2018associated with manufacturing process development and the manufacture of drug product in preparation for potential approval in 2019. Makena-related costsreflected a $7.7 million decrease driven primarily by the completion of the auto-injector program in 2017, partially offset by costs incurred in the Subpart Htrials. Feraheme-related costs reflected a $3.6 million decrease driven primarily by the completion of the IDA study in 2017, partially offset by an increase incosts related to the ongoing pediatric studies. The decreased spend for Feraheme,81Table of ContentsMakena, and Vyleesi was partially offset by an increase of $5.2 million related to costs incurred for the Intrarosa HSDD study in post-menopausal women.We have a number of ongoing research and development programs that we are conducting independently or in collaboration with third parties. Weexpect our internal research and development expenses to increase substantially in 2019 as compared to 2018 as we expand our internal infrastructure andcontinue to establish more robust development capabilities. In addition, we expect our external research and development expenses to increase, primarilydriven by our investments in AMAG-423 and ciraparantag, including to purchase drug supply needed to support our clinical trials. We cannot determine withcertainty the duration and completion costs of our current or future clinical trials of our products or product candidates as the duration, costs and timing ofclinical trials depends on a variety of factors including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollmentrates and significant and changing government regulation.Acquired In-Process Research and DevelopmentDuring 2018, we recorded $32.5 million for acquired IPR&D related to AMAG-423 and Vyleesi as the respective product candidates had not yetreceived regulatory approval. Of the $32.5 million, $12.5 million was paid to Velo in September 2018 as an upfront option exercise fee in connection withour acquisition of AMAG-423 and $20.0 million was paid to Palatin in the second quarter of 2018 for the milestone obligation associated with the FDAacceptance of the Vyleesi NDA.During 2017, we recorded acquired IPR&D expense of $65.8 million primarily related to (a) a $60.0 million one-time upfront payment under the termsof the Palatin License Agreement, which we characterized as acquired IPR&D as the product candidate had not yet received regulatory approval and (b) $5.8million, which represented a portion of the $83.5 million of consideration recorded to date under the terms of the Endoceutics License Agreement, based onour determination that this portion of the total consideration did not have an alternative future use. Selling, General and Administrative Expenses Our selling, general and administrative expenses include costs related to our commercial personnel, including our specialty sales forces, medicaleducation professionals, pharmacovigilance, safety monitoring and commercial support personnel, costs related to our administrative personnel, includingour legal, finance, business development and executive personnel, external and facilities costs required to support the marketing and sale of our products, andother costs associated with our corporate activities.Selling, general and administrative expenses for 2018 and 2017 consisted of the following (in thousands except for percentages): Years Ended December 31, 2018 to 2017 2018 2017 $ Change % ChangeCompensation, payroll taxes and benefits$126,754 $99,013 $27,741 28%Professional, consulting and other outside services134,049 110,637 23,412 21%Fair value of contingent consideration liability(49,607) (47,686) (1,921) 4%Equity-based compensation expense16,614 16,187 427 3%Total selling, general and administrative expenses$227,810 $178,151 $49,659 28% Total selling, general and administrative expenses increased by $49.7 million, or approximately 28%, as compared to the same period in 2017. Thisincrease was primarily driven by organizational growth associated with significant launch activities for multiple products in 2018 and costs related to thecommercialization of Intrarosa.In addition, total selling, general and administrative expenses for each of the years ended December 31, 2018 and 2017 included a $49.6 million and$47.7 million reversal, respectively, to the fair value of contingent consideration liability primarily due to changes in our estimated Makena revenues and theassociated milestone payments, as discussed in more detail in Note F, “Fair Value Measurements,” to our consolidated financial statements included in thisAnnual Report on Form-10-K.We expect that total selling, general and administrative expenses will increase in 2019 as compared to 2018 as we prepare for the potential launch ofVyleesi, assuming FDA approval in 2019, and as we continue to invest in the growth of our commercial products, including the Makena auto-injector,Intrarosa and Feraheme.82Impairment of Intangible AssetsThere were no impairments of intangible assets during the year ended December 31, 2018. During 2017, we recorded an impairment charge of $319.2million on our Makena base technology intangible asset, which relates solely to the Makena IM product. See Note I, “Goodwill and Intangible Assets, Net,”to our consolidated financial statements included in this Annual Report on Form-10-K for additional information.Other Expense, NetOther expense, net for 2018 and 2017 consisted of the following (in thousands except for percentages): Years Ended December 31, 2018 to 2017 2018 2017 $ Change % ChangeInterest expense$(51,971) $(68,382) $16,411 (24)%Loss on debt extinguishment(35,922) (10,926) (24,996) >100 %Interest and dividend income5,328 2,810 2,518 90 %Other expense(74) (70) (4) 6 %Total other expense, net$(82,639) $(76,568) $(6,071) 8 %Other expense, net for 2018 increased by $6.1 million as compared to 2017 primarily as the result of the following:•$35.9 million loss on extinguishment of debt (including a $28.1 million redemption premium) incurred as a result of the early redemption of $500.0million aggregate principal amount of 7.875% Senior Notes due 2023 (the “2023 Senior Notes”) during 2018 compared to a $10.9 million loss onextinguishment of debt due to the early repayment of a 2015 term loan facility and repurchase of a portion of the 2023 Senior Notes during 2017;and•$16.4 million decrease in interest expense as compared to 2017 primarily due to the early redemption of the 2023 Senior Notes in 2018 andrepayment of a 2015 term loan facility in 2017.We expect our other expense, net to decrease in 2019 as compared to 2018 due to a reduction in interest expense related to the 2018 redemption of the2023 Senior Notes.Income Tax Expense (Benefit)The following table summarizes our effective tax rate and income tax expense (benefit) for 2018 and 2017 (in thousands except for percentages): Years Ended December 31, 2018 2017Effective tax rate(31)% 46%Income tax expense (benefit)$39,654 $(175,254)For 2018, we recognized income tax expense of $39.7 million, representing an effective tax rate of (31)%. The difference between the expected statutoryfederal tax rate of 21% and the (31)% effective tax rate for 2018 was primarily attributable to the establishment of a valuation allowance on net deferred taxassets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefitfrom contingent consideration associated with Lumara Health, state income taxes and orphan drug tax credits. We have established a valuation allowance onour deferred tax assets other than refundable credits to the extent that our existing taxable temporary differences would not be available as a source of incometo realize the benefits of those deferred tax assets. Our valuation allowance on our deferred tax assets, other than refundable AMT credits, increased during theyear ended December 31, 2018 primarily because the deferred tax liabilities associated with the CBR business, which was reclassified to discontinuedoperations and sold during 2018, are no longer available as a source of income to realize the benefits of the net deferred tax assets.In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act includes significant changes to the U.S. corporateincome tax system, including a reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of the reduction inthe federal tax rate, we revalued our ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $17.6 million tax benefit. Duringthe year ended December 31,83Table of Contents2018, we completed our accounting for the enactment date income tax effects of the 2017 Tax Act in accordance with Staff Accounting Bulletin No. 118 andrecorded an immaterial adjustment as a result. See Note K, “Income Taxes,” to our consolidated financial statements included in this Annual Report onForm 10-K for additional information regarding the 2017 Tax Act.For 2017, we recognized an income tax benefit of $175.3 million, representing an effective tax rate of 46%. The difference between the expectedstatutory federal tax rate of 35% and the 46% effective tax rate for 2017 was was primarily attributable to the impact of federal tax reform, as discussed above,contingent consideration associated with Lumara Health, federal research and orphan drug tax credits generated during the year, and the impact of stateincome taxes, partially offset by equity-based compensation expenses and an increase to our valuation allowance.Net Income from Discontinued OperationsNet income from discontinued operations was $103.6 million in 2018 as compared to $5.9 million in 2017. Of the $103.6 million net income fromdiscontinued operations, $87.1 million represented a gain on the sale of the CBR business, which closed on August 6, 2018. For additional information, seeNote C, “Discontinued Operations and Held for Sale,” to our consolidated financial statements included in this Annual Report on Form 10-K.Results of Operations - 2017 as compared to 2016Revenues Total revenues for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeProduct sales, net Makena$387,158 $334,050 $53,108 16 %Feraheme105,930 97,058 8,872 9 %Intrarosa1,816 — 1,816 N/AMuGard741 1,062 (321) (30)%Total495,645 432,170 63,475 15 %Other revenues124 317 (193) (61)%Total revenues$495,769 $432,487 $63,282 15 % Our total revenues for 2017 increased by $63.3 million as compared to 2016, due primarily to increases in volume across substantially all of ourproducts.The following table sets forth customers who represented 10% or more of our total revenues for 2017 and 2016: Years Ended December 31, 2017 2016AmerisourceBergen Drug Corporation26% 27%McKesson Corporation24% 14%Caremark, LLC< 10% 10%84Table of ContentsTotal gross product sales were offset by product sales allowances and accruals for 2017 and 2016 as follows (in thousands except for percentages): Years Ended December 31, 2017 to 20162017 Percent ofgrossproduct sales 2016 Percent ofgrossproduct sales $ Change % ChangeGross product sales$920,061 $748,839 $171,222 23%Provision for product sales allowances andaccruals: Contractual adjustments310,588 34% 229,686 31% 80,902 35%Governmental rebates113,828 12% 86,983 12% 26,845 31%Total424,416 46% 316,669 43% 107,747 34%Product sales, net$495,645 $432,170 $63,475 15% Gross product sales increased by $171.2 million, or approximately 23%, during 2017 as compared to 2016 primarily due to increases of $126.1 millionand $39.7 million of Makena and Feraheme gross sales, respectively. Of the $126.1 million increase in gross Makena sales, $112.7 million was due toincreased volume and $13.4 million was due to price increases. Of the $39.7 million increase in gross Feraheme sales, $27.7 million was due to priceincreases and $12.1 million was due to increased volume. This total increase in gross product sales was partially offset by $107.7 million of additionalallowances and accruals in 2017 as compared to 2016. The increase in contractual adjustments as a percentage of gross product sales primarily related to achange in mix of business to commercial customers.Net product sales increased by $63.5 million or approximately 15%, during 2017 as compared to 2016 primarily due to a $53.1 million increase in netMakena sales and a $8.9 million increase in net Feraheme sales.Product Sales Allowances and AccrualsWe may refine our estimated revenue reserves as we continue to obtain additional experience or as our customer mix changes. If we determine in futureperiods that our actual experience is not indicative of our expectations, if our actual experience changes, or if other factors affect our estimates, we may berequired to adjust our allowances and accruals estimates, which would affect our net product sales in the period of the adjustment and could be significant.An analysis of the amount of our product reserves for 2017 and 2016, is as follows (in thousands): ContractualAdjustments GovernmentalRebates TotalBalance at January 1, 2016$30,177 $25,767 $55,944Current provisions relating to sales in current year224,894 93,035 317,929Adjustments relating to sales in prior years(2,348) (6,052) (8,400)Payments/returns relating to sales in current year(181,150) (41,636) (222,786)Payments/returns relating to sales in prior years(23,973) (19,715) (43,688)Balance at December 31, 2016$47,600 $51,399 $98,999Current provisions relating to sales in current year314,537 112,167 426,704Adjustments relating to sales in prior years(3,949) 1,661 (2,288)Payments/returns relating to sales in current year(253,545) (61,569) (315,114)Payments/returns relating to sales in prior years(42,479) (53,060) (95,539)Balance at December 31, 2017$62,164 $50,598 $112,762During 2017 and 2016, we implemented gross price increases for Feraheme and Makena, some portion of which were discounted back to customersunder volume or market share based contracts. When portions of price increases are discounted back to customers, it can widen the gross to net adjustmentpercentage while still resulting in a greater net price per unit.85Table of ContentsCosts and ExpensesCost of product sales for 2017 and 2016 were as follows (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeCost of product sales$161,349 $96,314 $65,035 68%Percentage of net product sales33% 22% The $65.0 million increase in our cost of product sales for 2017 as compared to 2016 was primarily attributable to a $58.2 million net increase inamortization of the Makena base technology intangible asset due to the change in its estimated useful life in 2017 and the Intrarosa developed technologyintangible asset, which was placed in service in 2017. Of the remaining $6.8 million increase, $6.6 million was due to increased volume across substantiallyall of our products and $3.0 million was due to overhead costs and inventory write-offs, partially offset by a $2.9 million decrease in amortization of theinventory step-up.Research and Development Expenses Research and development expenses for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeExternal research and development expenses Vyleesi-related costs$27,832 $— $27,832 N/AMakena-related costs12,971 19,113 (6,142) (32)%Feraheme-related costs7,699 28,067 (20,368) (73)%Other external costs6,393 2,998 3,395 >100 %Intrarosa-related costs1,058 — 1,058 N/ATotal55,953 50,178 5,775 12 %Internal research and development expenses19,064 15,383 3,681 24 %Total research and development expenses$75,017 $65,561 $9,456 14 % Total research and development expenses incurred in 2017 increased by $9.5 million, or 14%, as compared to 2016. The increase was due primarily to$27.8 million incurred in connection with our reimbursement of costs to Palatin associated with the development and regulatory activities for ourbremelanotide NDA submission filed in the first quarter of 2018. This increase was partially offset by a $6.1 million decrease related to costs incurred for theMakena auto-injector program and a $20.4 million decrease in Feraheme-related spending as the result of the completion in 2016 of the Phase 3 clinical trialto expand the Feraheme label.Acquired In-Process Research and DevelopmentDuring 2017, we recorded acquired IPR&D expense of $65.8 million related to the $60.0 million one-time upfront payment under the terms of the PalatinLicense Agreement and $5.8 million, which represented a portion of the $83.5 million of consideration recorded to date under the terms of the EndoceuticsLicense Agreement, based on our determination that this portion of total consideration did not have an alternative future use. We did not record any IPR&Dexpenses during 2016.86Table of ContentsSelling, General and Administrative Expenses Selling, general and administrative expenses for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeCompensation, payroll taxes and benefits$99,013 $66,592 $32,421 49%Professional, consulting and other outside services110,637 61,603 49,034 80%Fair value of contingent consideration liability(47,686) 25,683 (73,369) <(100 %)Equity-based compensation expense16,187 15,590 597 4%Total selling, general and administrative expenses$178,151 $169,468 $8,683 5% Total selling, general and administrative expenses, excluding the $73.4 million decrease to the contingent consideration liability expense, describedbelow, increased by $82.1 million, or approximately 57%, as compared to the same period in 2016 due to the following:•$32.4 million increase in compensation, payroll taxes and benefits primarily due to increased personnel costs associated with the addition of ourwomen’s health commercial team and other organizational growth to support the July 2017 launch of Intrarosa; and•$49.0 million increase in sales and marketing, consulting, professional fees, and other expenses primarily due to costs related to the July 2017launch and commercialization of Intrarosa, increased costs associated with the expansion of our women’s health sales force and litigation expenserelated to our ongoing Sandoz patent infringement litigation.In addition, total selling, general and administrative expenses for 2017 reflects a $73.4 million decrease driven by a $47.7 million decrease to the fairvalue of contingent consideration liability expense in 2017 primarily due to a change in our estimated Makena revenues and associated milestone payments,as discussed in more detail in Note F, “Fair Value Measurements,” to our consolidated financial statements included in this Annual Report on Form-10-K.Impairment of Intangible AssetsDuring 2017, we recorded an impairment charge of $319.2 million on our Makena base technology intangible asset, which relates solely to the MakenaIM product. During 2016, we recorded an impairment charge of $15.7 million for the MuGard Rights. See Note I, “Goodwill and Intangible Assets, Net,” toour consolidated financial statements included in this Annual Report on Form 10-K for additional information.Other Expense, NetOther expense, net for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeInterest expense$(68,382) $(73,153) $4,771 (7)%Loss on debt extinguishment(10,926) — (10,926) N/AInterest and dividend income2,810 3,149 (339) (11)%Other expense(70) 189 (259) >(100%)Total other expense, net$(76,568) $(69,815) $(6,753) 10 %Other expense, net for 2017 increased by $6.8 million as compared to 2016 primarily as the result of the following:•$10.9 million loss on debt extinguishment in 2017 from the early repayment of the outstanding principal amount of a 2015 term loan facility andthe repurchase of a portion of the 2023 Senior Notes; and•$4.8 million decrease in interest expense as compared to 2016 primarily as the result of the repayment of a 2015 term loan facility.87Table of ContentsIncome Tax (Benefit) ExpenseThe following table summarizes our effective tax rate and income tax (benefit) expense for 2017 and 2016 (in thousands except for percentages): Years Ended December 31, 2017 2016Effective tax rate46% 86%Income tax (benefit) expense$(175,254) $13,171For 2017, we recognized an income tax benefit of $175.3 million, representing an effective tax rate of 46%. The difference between the expectedstatutory federal tax rate of 35% and the 46% effective tax rate for 2017 was primarily attributable to the impact of federal tax reform, as discussed below,contingent consideration associated with Lumara Health, federal research and orphan drug tax credits generated during the year, and the impact of stateincome taxes, partially offset by equity-based compensation expenses and an increase to our valuation allowance.In December 2017, the 2017 Tax Act was enacted. The 2017 Tax Act includes significant changes to the U.S. corporate income tax system, including areduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of the reduction in the federal tax rate, we revaluedour ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $17.6 million tax benefit. See Note K, “Income Taxes,” to ourconsolidated financial statements included in this Annual Report on Form 10-K for additional information regarding the 2017 Tax Act.For 2016, we recognized income tax expense of $13.2 million, representing an effective tax rate of 86%. The difference between the expected statutoryfederal tax rate of 35% and the 86% effective tax rate for 2016 was attributable to the impact of contingent consideration associated with Lumara Health,equity-based compensation expenses and other permanent items, including meals and entertainment expense, officers compensation and Makena-relatedexpenses, partially offset by the benefit of the federal research and development and orphan drug tax credits generated during the year.Liquidity and Capital Resources General We currently finance our operations primarily from cash generated from our operating activities, including sales of our commercialized products. Cash,cash equivalents, investments and certain financial obligations as of December 31, 2018 and 2017 consisted of the following (in thousands except forpercentages): December 31, 2018 2017 $ Change % ChangeCash and cash equivalents$253,256 $162,855 $90,401 56 %Investments140,915 136,593 4,322 3 %Total$394,171 $299,448 $94,723 32 % Outstanding principal on 2023 Senior Notes$— $475,000 $(475,000) (100)%Outstanding principal on 2022 Convertible Notes320,000 320,000 — — %Outstanding principal on 2019 Convertible Notes21,417 21,417 — — %Total$341,417 $816,417 $(475,000) (58)% 88Table of ContentsCash FlowsThe following table presents a summary of the primary sources and uses of cash for the years ended December 31, 2018, 2017 and 2016 (in thousands): For the Years Ended December 31 2018 compared to2017 2017 compared to2016(In thousands, except percentages)2018 2017 2016 Net cash provided by operating activities$60,800 $106,596 $246,222 $(45,796) $(139,626)Net cash provided by (used in) investing activities502,155 102,920 (72,704) 399,235 175,624Net cash used in financing activities(501,974) (293,644) (127,918) (208,330) (165,726)Net increase (decrease) in cash, cash equivalents and restrictedcash$60,981 $(84,128) $45,600 $145,109 $(129,728)Operating ActivitiesCash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financingactivities. We have historically financed our operating and capital expenditures primarily through cash flows earned through our operations. We expect cashprovided by operating activities in addition to our cash, cash equivalents and marketable securities will continue to be a primary source of funds to financeoperating needs and capital expenditures.Operating cash flow is derived by adjusting our net income (loss) for:•Non-cash operating items, such as depreciation and amortization and equity-based compensation;•Changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactionsand when they are recognized in results of operations;•Changes in deferred incomes taxes; and•Changes associated with the fair value of contingent payments associated with our acquisitions of businesses.For 2018 compared to 2017, net cash flows provided by operations decreased by $45.8 million, driven primarily by a decrease in net income as adjustedfor non-cash charges of $34.9 million and a $10.9 million decrease due to changes in operating assets and liabilities. The cash flows from operating activitiesinclude cash flows from the operating activities of the CBR business, which is included in discontinued operations. Subsequent to the closing of the CBRtransaction on August 6, 2018, we no longer generated cash flows from that business. See Note C, “Discontinued Operations and Held for Sale,” to ourconsolidated financial statements included in this Annual Report on Form 10-K for further detail regarding our discontinued operations.For 2017 compared to 2016, net cash flows provided by operations decreased by $139.6 million driven primarily by a decrease in net income as adjustedfor non-cash charges of $84.7 million and a $54.9 million increase due to changes in operating assets and liabilities.Investing ActivitiesCash flows provided by investing activities was $502.2 million in 2018 due to $519.3 million in proceeds from the sale of CBR, partially offset by netpurchases of marketable securities of $4.6 million and capital expenditures of $2.5 million.Cash flows provided by investing activities in 2017 was $102.9 million due to net proceeds from the sale of marketable securities of $167.7 million,partially offset by $55.8 million of cash used to purchase the Intrarosa asset and capital expenditures of $9.0 million.Cash flows used in investing activities in 2016 was $72.7 million due to net purchases of marketable securities of $67.2 million and capital expendituresof $5.5 million.89Table of ContentsFinancing ActivitiesCash used in financing activities was $502.0 million in 2018 due to the repayment of the $475.0 million balance of our 2023 Senior Notes and a relatedredemption premium of $28.1 million.Cash used in financing activities in 2017 was $293.6 million driven by $353.1 million of principal payments made during 2017, including the fullrepayment of the remaining balance of a 2015 term loan facility, $191.7 million used for the repurchase of a portion of our 2019 Convertible Notes, $39.8million of contingent consideration payments and the repurchase of common stock of $19.5 million, partially offset by $320.0 million net proceeds related tothe issuance of our 2022 Convertible Notes.Cash used in financing activities in 2016 was $127.9 million due to $92.1 million of contingent consideration payments, $20.0 million for therepurchase of common stock and $17.5 million in principal debt repayments.Future Liquidity ConsiderationsWe believe that our cash, cash equivalents and marketable securities as of December 31, 2018, and the cash we expect to receive from sales of ourproducts, will be sufficient to satisfy our cash flow needs for the foreseeable future. As we enter 2019 and look to our significant portfolio investmentopportunities, we intend to spend more than our expected revenues in 2019 and will therefore utilize a portion of our $394.2 million of cash and investmentsto fund our operations. This period of cash outflow is consistent with our evolving business plan to develop and launch innovative products that addressunmet medical needs and can deliver long-term, durable revenue growth. Additionally, since December 31, 2018, our actual or expected utilization of cashincludes, but is not limited to, the following:•The $58.2 million of closing consideration for the acquisition of Perosphere, including the assumption of certain liabilities, which we paid inJanuary 2019;•Repayment of the $21.4 million outstanding principal balance on our 2019 Convertible Notes, which we paid in February 2019;•Approximately $6.0 million of payments related to the February 2019 restructuring;•A $60.0 million milestone obligation to Palatin conditioned and payable upon FDA approval of Vyleesi; and•Approximately $10.0 million of cash interest in connection with our 2022 Convertible Notes.For a detailed discussion regarding the risks and uncertainties related to our liquidity and capital resources, please refer to our Risk Factors in Part I,Item 1A of this Annual Report on Form 10-K.Borrowings and Other LiabilitiesIn August 2015, in connection with the CBR acquisition, we completed a private placement of $500.0 million aggregate principal amount of 7.875%Senior Notes due 2023 (the “2023 Senior Notes”). In October 2017, we repurchased $25.0 million principal of the 2023 Senior Notes in a privatelynegotiated transaction with cash on hand. In September 2018, we repurchased the remaining $475.0 million of the 2023 Senior Notes using the proceeds fromthe CBR sale.In the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due 2022 (the “2022 ConvertibleNotes”). We received net proceeds of $310.4 million from the sale of the 2022 Convertible Notes, after deducting fees and expenses of $9.6 million. The2022 Convertible Notes are senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 andDecember 1 of each year, beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted.Upon conversion of the 2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or acombination thereof, at a conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which correspondsto an initial conversion price of approximately $27.36 per share of our common stock. The conversion rate is subject to adjustment from time to time. The2022 Convertible Notes were not convertible as of December 31, 2018.In February 2014, we issued $200.0 million aggregate principal amount of 2.5% convertible senior notes due February 15, 2019 (the “2019 ConvertibleNotes”). In May 2017 and September 2017, we entered into privately negotiated transactions with certain investors to repurchase approximately $158.9million and $19.6 million, respectively, aggregate principal amount of the90Table of Contents2019 Convertible Notes for an aggregate repurchase price of approximately $171.3 million and $21.4 million, respectively, including accrued interest. Theremaining $21.4 million of 2019 Convertible Notes matured on February 15, 2019 and were settled with cash.For additional information, see Note R, “Debt,” to our consolidated financial statements included in this Annual Report on Form 10-K. Share Repurchase Program In January 2016, we announced that our board of directors had authorized a program to repurchase up to $60.0 million in shares of our common stock.The repurchase program does not have an expiration date and may be suspended for periods or discontinued at any time. Under the program, we maypurchase our stock from time to time at the discretion of management in the open market or in privately negotiated transactions. The number of sharesrepurchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, alongwith working capital requirements, general business conditions and other factors. We may also from time to time establish a trading plan under Rule 10b5-1of the Securities and Exchange Act of 1934 to facilitate purchases of our shares under this program. As of December 31, 2018, we repurchased and retired acumulative total of 2,198,010 shares of common stock under this repurchase program for $39.5 million at an average purchase price of $17.97 per share. As ofDecember 31, 2018, $20.5 million remains available for the repurchase of shares under the program. We did not repurchase any of our common stock during2018. Contractual ObligationsOur long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. Theseinclude commitments related to our facility and vehicle leases, purchases of inventory, debt obligations (including interest payments), and other purchaseobligations. Future contractual obligations, as of December 31, 2018, are as follows (in thousands): Payment due by period Total Less than 1 year 1-3 years 3-5 years More than 5 yearsLease obligations$10,228 $5,119 $5,109 $— $—Purchase commitments88,653 50,353 27,923 7,229 3,1482019 Convertible Notes21,484 21,484 — — —2022 Convertible Notes356,400 10,400 20,800 325,200 —Total$476,765 $87,356 $53,832 $332,429 $3,148Facility Lease ObligationsIn June 2013, we entered into a lease agreement with BP Bay Colony LLC (the “Landlord”) for the lease of certain real property located at 1100 WinterStreet, Waltham, Massachusetts (the “Waltham Premises”) for use as our principal executive offices. The initial term of the lease was five years and twomonths with one five-year extension term at our option. We have entered into several amendments to the original lease to add additional space and to extendthe term of the original lease to April 2021. In addition to base rent, we are also required to pay a proportionate share of the Landlord’s operating costs.The Landlord agreed to pay for certain agreed-upon improvements to the Waltham Premises and we agreed to pay for any increased costs due to changesby us to the agreed-upon plans. We record all tenant improvements paid by us as leasehold improvements and amortize these improvements over the shorterof the estimated useful life of the improvement or the remaining life of the initial lease term. Amortization of leasehold improvements is included indepreciation expense.In addition, in connection with our facility lease for the Waltham Premises, the Landlord holds a security deposit in the form of an irrevocable letter ofcredit, which is classified on our balance sheet as a long-term asset and was $0.5 million as of December 31, 2018 and 2017, respectively.We also lease vehicles for our sales employees under a Master Agreement with Enterprise FM Trust. Each vehicle is leased for a three year term,commencing on the delivery date.Rent expense, net of deferred rent amortization, for our leases was $5.1 million, $3.0 million, and $1.6 million for 2018, 2017 and 2016, respectively.91Table of ContentsPurchase ObligationsPurchase obligations primarily represent minimum purchase commitments for inventory. As of December 31, 2018, our minimum purchase commitmentstotaled $88.7 million.Contingent Consideration Related to Business CombinationsIn connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to $350.0 million in milestone payments based on theachievement of certain sales thresholds. Due to the contingent nature of these milestone payments, we cannot predict the amount or timing of such paymentswith certainty. During 2018, we were not obligated to make any milestone payments. During 2017 and 2016, we paid $50.0 million and $100.0 million ofthese milestone payments, respectively. We do not expect to pay any additional milestone payments.As of December 31, 2018, the contingent consideration related to the Lumara Health and MuGard acquisitions are our only financial liabilities measuredand recorded using Level 3 inputs in accordance with accounting guidance for fair value measurements, and represented 100% of the total liabilitiesmeasured at fair value. See Note F, “Fair Value Measurements,” to our consolidated financial statements included in this Annual Report on Form 10-K formore information.Contingent Regulatory and Commercial Milestone PaymentsIn September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 withVelo, the terms of which were amended at the time of exercise. As part of the acquisition, we are be obligated to pay Velo a $30.0 million milestone paymentupon FDA approval of AMAG-423. In addition, we are obligated to pay sales milestone payments to Velo of up to $240.0 million in the aggregate, triggeredat various annual net sales thresholds between $300.0 million and $900.0 million and low-single digit royalties based on net sales. Further, we have assumedadditional obligations under a previous agreement entered into by Velo with a third-party, including a $5.0 million milestone payment upon regulatoryapproval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterly installments as a percentage of quarterly grosscommercial sales until the obligation is met. We are also obligated to pay the third-party low-single digit royalties based on net sales.Under the terms of the Endoceutics License Agreement, which we entered into with Endoceutics in February 2017, we have agreed to pay tiered royaltiesto Endoceutics equal to a percentage of net U.S. sales of Intrarosa ranging from the mid-teens (for calendar year net sales up to $150.0 million) to mid twentypercent (for any calendar year net sales that exceed $1.0 billion for the commercial life of Intrarosa). Endoceutics is also eligible to receive certain salesmilestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $300.0 million. If annualnet U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to $850.0 million, which would be triggered atvarious increasing sales thresholds.Under the terms of the Palatin License Agreement, which we entered into with Palatin in January 2017, we have agreed to make future contingentpayments of (a) up to $60.0 million upon FDA approval of Vyleesi, and (b) up to $300.0 million of aggregate sales milestone payments upon theachievement of certain annual net sales over the course of the license. The first sales milestone of $25.0 million will be triggered when Vyleesi annual netsales exceed $250.0 million. We are also obligated to pay Palatin tiered royalties on annual net sales of Vyleesi, on a product-by-product basis, in allcountries of North America ranging from the high-single digits to the low double-digits.In connection with a development and license agreement entered into with Antares Pharma, Inc. (“Antares”), we are required to pay royalties to Antareson net sales of the Makena auto-injector commencing on the launch of the Makena auto-injector in a particular country until the Makena auto-injector is nolonger sold or offered for sale in such country or the Antares License Agreement is terminated. The royalty rates range from high single digit to low doubledigits and are tiered based on levels of net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where there are genericequivalents to the Makena auto-injector being sold in a particular country. Antares is also entitled to sales-based milestone payments upon the achievementof certain annual net sales.92Table of ContentsOther CommitmentsUnder the terms of the Endoceutics License Agreement, we have committed to an annual minimum marketing spend for Intrarosa and we have agreed toshare the direct costs with Endoceutics related to certain clinical studies, based upon a negotiated allocation with us funding up to $20.0 million, of whichwe have paid approximately $6.0 million.Employment ArrangementsWe have entered into employment agreements or other arrangements with most of our executive officers and certain other employees, which provide forthe continuation of salary and certain benefits and, in certain instances, the acceleration of the vesting of certain equity awards to such individuals in theevent that the individual is terminated other than for cause, as defined in the applicable employment agreements or arrangements.Indemnification ObligationsIn the course of operating our business, we have entered into a number of indemnification arrangements under which we may be required to makepayments to or on behalf of certain third parties including our directors, officers, and certain employees as well as certain other third parties with whom weenter into agreements. For further discussion of how this may affect our business, see Note P, “Commitments and Contingencies,” to our consolidatedfinancial statements included in this Annual Report on Form 10-K.Legal ProceedingsFor detailed information on our legal proceedings, see Note P, “Commitments and Contingencies,” to our consolidated financial statements included inthis Annual Report on Form 10-K. Off-Balance Sheet ArrangementsAs of December 31, 2018, we did not have any off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:Interest Rate RiskAs of December 31, 2018 and 2017, our investments totaled $140.9 million and $136.6 million, respectively, and were invested in corporate debtsecurities, U.S. treasury and government agency securities, commercial paper, and certificates of deposit. Our investments meet high credit quality anddiversification standards, as specified in our investment policy. Our investment policy also limits the amount of our credit exposure to any one issue or issuer,excluding U.S. government entities, and seeks to manage these assets to achieve our goals of preserving principal, maintaining adequate liquidity at alltimes, and maximizing returns. These investments are subject to interest rate risk. The modeling technique used measures the change in fair values arisingfrom an immediate hypothetical shift in market interest rates and assumes that ending fair values include principal plus accrued interest. If market interestrates for comparable investments were to increase or decrease immediately and uniformly by 50 basis points, or one-half of a percentage point, from levels asof December 31, 2018 and 2017, this would have resulted in a hypothetical change in fair value of our investments of approximately $0.7 million and$0.7 million, respectively. These amounts are determined by considering the impact of the hypothetical interest rate movements on our available-for-saleinvestment portfolios. This analysis does not consider the effect of credit risk as a result of the changes in overall economic activity that could exist in suchan environment.Equity Price RiskOur 2022 Convertible Notes include conversion and settlement provisions that are based on the price of our common stock at conversion or at maturityof the 2022 Convertible Notes. The amount of cash we may be required to pay is determined by the price of our common stock. The fair value of our 2022Convertible Notes is dependent on the price and volatility of our common stock and will generally increase or decrease as the market price of our commonstock changes.93Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:Index To Consolidated Financial StatementsManagement’s Annual Report on Internal Control over Financial Reporting95Report of Independent Registered Public Accounting Firm96Consolidated Balance Sheets - as of December 31, 2018 and 201798Consolidated Statements of Operations - for the years ended December 31, 2018, 2017, and 201699Consolidated Statements of Comprehensive Loss - for the years ended December 31, 2018, 2017, and 2016100Consolidated Statements of Stockholders’ Equity - for the years ended December 31, 2018, 2017 and 2016101Consolidated Statements of Cash Flows - for the years ended December 31, 2018, 2017, and 2016102Notes to Consolidated Financial Statements10494Table of ContentsMANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f)and 15d-15(f) under the Securities and Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under thesupervision of our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reportingand the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Because ofits inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectivenessto future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financialreporting as of December 31, 2018 based on the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizationsof the Treadway Commission (COSO) in 2013. Based on this assessment, management concluded that our internal control over financial reporting waseffective as of December 31, 2018.The effectiveness of our internal control over financial reporting as of December 31, 2018, has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which is included herein.95Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of AMAG Pharmaceuticals, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of AMAG Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31,2018 and 2017, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years inthe period ended December 31,2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have auditedthe Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, andfor its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on InternalControl over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company'sinternal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.96Table of ContentsBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPBoston, MassachusettsMarch 1, 2019We have served as the Company’s auditor since 1982.97Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED BALANCE SHEETS(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) As of December 31, 2018 2017ASSETS Current assets: Cash and cash equivalents$253,256 $162,855Marketable securities140,915 136,593Accounts receivable, net75,347 91,460Inventories26,691 34,443Prepaid and other current assets18,961 11,009Note receivable10,000 —Assets held for sale— 45,508Total current assets525,170 481,868Property and equipment, net7,521 7,904Goodwill422,513 422,513Intangible assets, net217,033 375,479Deferred tax assets1,260 47,120Restricted cash495 495Other long-term assets1,467 266Assets held for sale, net of current portion— 564,711Total assets$1,175,459 $1,900,356LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable$14,487 $7,717Accrued expenses129,537 166,732Current portion of convertible notes, net21,276 —Current portion of acquisition-related contingent consideration144 49,399Liabilities held for sale— 53,870Total current liabilities165,444 277,718Long-term liabilities: Long-term debt, net— 466,291Convertible notes, net261,933 268,392Acquisition-related contingent consideration215 686Other long-term liabilities1,212 1,204Liabilities held for sale, net of current portion— 95,821Total liabilities428,804 1,110,112Commitments and Contingencies (Note P) Stockholders’ equity: Preferred stock, par value $0.01 per share, 2,000,000 shares authorized; none issued— —Common stock, par value $0.01 per share, 117,500,000 shares authorized; 34,606,760 and 34,083,112 shares issued andoutstanding at December 31, 2018 and December 31, 2017, respectively346 341Additional paid-in capital1,292,736 1,271,628Accumulated other comprehensive loss(3,985) (3,908)Accumulated deficit(542,442) (477,817)Total stockholders’ equity746,655 790,244Total liabilities and stockholders’ equity$1,175,459 $1,900,356The accompanying notes are an integral part of these consolidated financial statements.98Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT PER SHARE DATA) Years Ended December 31, 2018 2017 2016Revenues: Product sales, net$473,852 $495,645 $432,170Other revenues150 124 317Total revenues474,002 495,769 432,487Costs and expenses: Cost of product sales215,892 161,349 96,314Research and development expenses44,846 75,017 65,561Acquired in-process research and development32,500 65,845 —Selling, general and administrative expenses227,810 178,151 169,468Impairment of intangible assets— 319,246 15,724Restructuring expenses— — 341Total costs and expenses521,048 799,608 347,408Operating (loss) income(47,046) (303,839) 85,079Other income (expense): Interest expense(51,971) (68,382) (73,153)Loss on debt extinguishment(35,922) (10,926) —Interest and dividend income5,328 2,810 3,149Other (expense) income(74) (70) 189Total other expense, net(82,639) (76,568) (69,815)(Loss) income from continuing operations before income taxes(129,685) (380,407) 15,264Income tax expense (benefit)39,654 (175,254) 13,171Net (loss) income from continuing operations$(169,339) $(205,153) $2,093 Discontinued operations: Income (loss) from discontinued operations$18,873 $10,313 $(6,209)Gain on sale of CBR business87,076 — —Income tax expense (benefit)2,371 4,388 (1,633)Net income (loss) from discontinued operations$103,578 $5,925 $(4,576) Net loss$(65,761) $(199,228) $(2,483) Basic net (loss) income per share: (Loss) income from continuing operations$(4.92) $(5.88) $0.06Income (loss) from discontinued operations3.01 0.17 (0.13)Total$(1.91) $(5.71) $(0.07) Diluted net (loss) income per share: (Loss) income from continuing operations$(4.92) $(5.88) $0.06Income (loss) from discontinued operations3.01 0.17 (0.13)Total$(1.91) $(5.71) $(0.07) Weighted average shares outstanding used to compute net (loss) income per share: Basic34,394 34,907 34,346Diluted34,394 34,907 34,833The accompanying notes are an integral part of these consolidated financial statements.99Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(IN THOUSANDS) Years Ended December 31, 2018 2017 2016Net loss$(65,761) $(199,228) $(2,483)Other comprehensive (loss) income Unrealized (losses) gains on marketable securities: Holding (losses) gains arising during period, net of tax(77) (70) 261Reclassification adjustment for gains (losses) included in net (loss) income, net of tax— — 106Net unrealized (losses) gains on securities(77) (70) 367Total comprehensive loss$(65,838) $(199,298) $(2,116)The accompanying notes are an integral part of these consolidated financial statements.100Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(IN THOUSANDS, EXCEPT SHARES) Common Stock Additional Paid-in Capital Accumulated OtherComprehensiveIncome (Loss) AccumulatedDeficit Total Stockholders’Equity Shares AmountBalance at December 31, 201534,733,117 $347 $1,233,786 $(4,205) $(297,664) $932,264Net shares issued in connection with the exerciseof stock options and vesting of restricted stockunits355,450 3 227 — — 230Repurchase of common stock pursuant to the 2016share repurchase program(831,744) (8) (19,992) — — (20,000)Issuance of common stock under employee stockpurchase plan79,324 1 1,467 — — 1,468Non-cash equity-based compensation— — 22,543 — — 22,543Unrealized losses on securities, net of tax— — — 367 — 367Net loss— — — — (2,483) (2,483)Balance at December 31, 201634,336,147 343 1,238,031 (3,838) (300,147) 934,389Settlement of warrants— — 323 — — 323Equity component of the 2022 Convertible Notes,net of issuance costs and taxes— — 43,236 — — 43,236Cumulative effect of previously unrecognizedexcess tax benefits related to stock compensation— — — — 21,558 21,558Equity component of debt repurchase— — (27,988) — — (27,988)Shares issued in connection with EndoceuticsLicense Agreement600,000 6 13,494 — — 13,500Repurchase and retirement of common stockpursuant to the 2016 Share Repurchase Program(1,366,266) (14) (19,453) — — (19,467)Issuance of common stock under employee stockpurchase plan120,580 1 1,593 — — 1,594Net shares issued in connection with the exerciseof stock options and vesting of restricted stockunits, net of withholdings392,651 5 (1,272) — — (1,267)Non-cash equity based compensation— — 23,664 — — 23,664Unrealized losses on securities, net of tax— — — (70) — (70)Net loss— — — — (199,228) (199,228)Balance at December 31, 201734,083,112 341 1,271,628 (3,908) (477,817) 790,244ASC 606 adoption adjustment, net of tax— — — — 1,136 1,136Net shares issued in connection with the exerciseof stock options and vesting of restricted stockunits, net of withholdings463,776 4 275 — — 279Issuance of common stock under employee stockpurchase plan59,872 1 917 — — 918Non-cash equity based compensation— — 19,916 — — 19,916Unrealized losses on securities, net of tax— — — (77) — (77)Net loss— — — — (65,761) (65,761)Balance at December 31, 201834,606,760 $346 $1,292,736 $(3,985) $(542,442) $746,655The accompanying notes are an integral part of these consolidated financial statements. 101Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS) Years Ended December 31, 2018 2017 2016Cash flows from operating activities: Net loss$(65,761) $(199,228) $(2,483)Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization172,223 155,538 99,886Impairment of intangible assets— 319,246 19,663Provision for bad debt expense678 3,852 3,209Amortization of premium/discount on purchased securities87 302 624(Gain) loss on disposal of fixed assets(99) 265 —Non-cash equity-based compensation expense 19,916 23,664 22,543Non-cash IPR&D expense— 945 —Loss on debt extinguishment35,922 10,926 —Amortization of debt discount and debt issuance costs15,658 14,395 12,105(Gain) loss on sale of investments, net(1) 70 38Change in fair value of contingent consideration(49,607) (47,686) 25,683Deferred income taxes41,166 (178,421) 7,279Gain on sale of the CBR business(87,076) — —Transaction costs(14,111) — —Changes in operating assets and liabilities: Accounts receivable, net16,995 (14,978) (9,906)Inventories4,722 (2,331) (2,355)Receivable from collaboration— — 428Prepaid and other current assets(6,097) (2,222) 4,095Accounts payable and accrued expenses(32,568) 16,834 49,037Deferred revenues8,658 17,080 24,522Payment of contingent consideration in excess of acquisition date fair value— (10,432) (8,116)Other assets and liabilities95 (1,223) (30)Net cash provided by operating activities60,800 106,596 246,222Cash flows from investing activities: Proceeds from sales or maturities of marketable securities85,342 294,957 127,479Purchase of marketable securities(89,956) (127,249) (194,723)Acquisition of Intrarosa intangible asset— (55,800) —Proceeds from the sale of the CBR business519,303 — —Note receivable(10,000) — —Capital expenditures(2,534) (8,988) (5,460)Net cash provided by (used in) investing activities502,155 102,920 (72,704)The accompanying notes are an integral part of these consolidated financial statements.102Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(IN THOUSANDS) Years Ended December 31, 2018 2017 2016Cash flows from financing activities: Long-term debt principal payments(475,000) (353,125) (17,502)Proceeds from 2022 Convertible Notes— 320,000 —Payments to repurchase 2019 Convertible Notes— (191,730) —Payment of premium on debt extinguishment(28,054) (625) —Proceeds to settle warrants— 323 —Payment of convertible debt issuance costs— (9,553) —Payment of contingent consideration(119) (39,793) (92,130)Payments for repurchases of common stock— (19,466) (20,000)Proceeds from the exercise of common stock options3,881 3,021 3,885Payments of employee tax withholding related to equity-based compensation(2,682) (2,696) (2,171)Net cash used in financing activities(501,974) (293,644) (127,918)Net increase (decrease) in cash, cash equivalents and restricted cash60,981 (84,128) 45,600Cash, cash equivalents and restricted cash at beginning of the year192,770 276,898 231,298Cash, cash equivalents and restricted cash at end of the year$253,751 $192,770 $276,898Supplemental data of cash flow information: Cash paid for taxes$5,345 $5,296 $5,309Cash paid for interest$48,757 $56,959 $62,381Non-cash investing and financing activities: Fair value of common stock issued in connection with the acquisition of the Intrarosaintangible asset$— $12,555 $—Contingent consideration accrued for the acquisition of the Intrarosa intangible asset$— $9,300 $—The accompanying notes are an integral part of these consolidated financial statements.103Table of ContentsAMAG PHARMACEUTICALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. DESCRIPTION OF BUSINESSAMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative productsto patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across arange of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia managementand cancer supportive care, including Feraheme® (ferumoxytol injection) for intravenous use, Makena® (hydroxyprogesterone caproate injection),Intrarosa® (prasterone) vaginal inserts and MuGard® Mucoadhesive Oral Wound Rinse. In addition to our marketed products, our portfolio includes threeproduct candidates, Vyleesi™ (bremelanotide), which is being developed for the treatment of hypoactive sexual desire disorder (“HSDD”) in pre-menopausalwomen, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studiedas an anticoagulant reversal agent.We acquired ciraparantag through our acquisition of Perosphere Pharmaceuticals Inc (“Perosphere”), which was completed on January 16, 2019. SeeNote W, “Subsequent Events” for further details on the Perosphere acquisition.On August 6, 2018, we completed the sale of our wholly-owned subsidiary, CBR Acquisition Holdings Corp, and the Cord Blood Registry® (“CBR”)business to GI Partners (“GI”), a private equity investment firm, pursuant to the June 14, 2018 Stock Purchase Agreement between us and affiliates of GI. Wereceived $519.3 million in cash at closing and recognized a gain of $87.1 million on the sale during the year ended December 31, 2018. Since August 2015,we had provided services related to the preservation of umbilical cord blood stem cell and cord tissue units operated through CBR. For additionalinformation, see Note C, “Discontinued Operations and Held for Sale”.We are subject to risks common to companies in the pharmaceutical industry including, but not limited to (as such risks pertain to our business) ourability to successfully commercialize our products, intense competition, including from generic products; maintaining and defending the proprietary natureof our technology; our dependence upon third-party manufacturers and our potential inability to obtain raw or other materials and impacts of supplyshortages; our reliance on and the extent of reimbursement from third parties for the use of our products, including the impact of generic competitors,Makena’s high Medicaid reimbursement concentration and the limited level of reimbursement for Intrarosa; our ability to expand our product portfoliothrough business development transactions; the approval of our product candidates and our ability to commercialize such products, if approved; employeeretention and our ability to manage our expanded product portfolio; potential litigation, including securities and product liability suits; our ability to workeffectively and collaboratively with our licensors and partners; our reliance on other third parties in our business, including to conduct our clinical trials andundertake our product and distribution; our ability to attract and retain key employees; our potential failure to comply with federal and state healthcare fraudand abuse laws, marketing disclosure laws, or other federal and state laws and regulations and potential civil or criminal penalties as a result thereof;uncertainties regarding reporting and payment obligations under government pricing programs; post-approval commitments for Makena and Feraheme; ourability to comply with data protection laws and regulations; the impact of disruptions to our information technology systems; our level of and ability torepay our indebtedness; our access to sufficient capital; the availability of net operating loss carryforwards and other tax assets; potential differences betweenactual future results and the estimates or assumptions used by us in preparation of our consolidated financial statements, including goodwill and intangibleassets; the volatility of our stock price; the potential fluctuation of our operating results; and provisions in our charter, by-laws and certain contracts thatdiscourage an acquisition of our company.Throughout this Annual Report on Form 10-K, AMAG Pharmaceuticals, Inc. and our consolidated subsidiaries are collectively referred to as “theCompany,” “AMAG,” “we,” “us,” or “our.”B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation and Principles of ConsolidationThe accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S.(“GAAP”) and include the accounts of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.As of June 30, 2018, our CBR business met all of the conditions to be classified as held for sale and represented a discontinued operation, as weconsidered the disposal of the CBR business to be a strategic shift that would have a major effect on our operations and financial results. All assets andliabilities associated with CBR were therefore classified as assets and104Table of Contentsliabilities held for sale in our consolidated balance sheets for 2017. Further, all historical operating results for CBR are reflected within discontinuedoperations in the consolidated statements of operations for all periods presented. For additional information, see Note C, “Discontinued Operations and Heldfor Sale.”Use of Estimates and AssumptionsThe preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions thataffect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most significantestimates and assumptions are used to determine amounts and values of, but are not limited to: revenue recognition related to product sales revenue; productsales allowances and accruals; allowance for doubtful accounts; marketable securities; inventory; acquisition date fair value and subsequent fair valueestimates used to assess impairment of long-lived assets, including goodwill, in-process research and development (“IPR&D”) and other intangible assets;contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, inclusive of valuation allowances, andequity-based compensation expense. Actual results could differ materially from those estimates.Cash and Cash EquivalentsCash and cash equivalents consist principally of cash held in commercial bank accounts, money market funds and U.S. Treasury securities having anoriginal maturity of less than three months at the date of acquisition. We consider all highly liquid marketable securities with a maturity of three months orless as of the acquisition date to be cash equivalents. At December 31, 2018 and 2017, substantially all of our cash and cash equivalents were held in eithercommercial bank accounts or money market funds.Marketable SecuritiesWe account for and classify our marketable securities as either “available-for-sale,” “held-to-maturity,” or “trading debt securities,” in accordance withthe accounting guidance related to the accounting and classification of certain investments in marketable securities. The determination of the appropriateclassification by us is based primarily on management’s ability and intent to sell the debt security at the time of purchase. As of December 31, 2018 and2017, all of our marketable securities were classified as available-for-sale.Available-for-sale securities are those securities which we view as available for use in current operations, if needed. We generally classify our available-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheet date. Available-for-sale marketable securities are stated at fair value with their unrealized gains and losses included in accumulated other comprehensive income (loss) withinthe consolidated statements of stockholders’ equity, until such gains and losses are realized in other income (expense) within the consolidated statements ofoperations or until an unrealized loss is considered other-than-temporary.We recognize other-than-temporary impairments of our marketable securities when there is a decline in fair value below the amortized cost basis and if(a) we have the intent to sell the security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized costbasis. If either of these conditions is met, we recognize the difference between the amortized cost basis of the security and its fair value at the impairmentmeasurement date in our consolidated statements of operations. If neither of these conditions is met, we must perform additional analysis to evaluate whetherthe unrealized loss is associated with the creditworthiness of the issuer of the security rather than other factors, such as interest rates or market factors. If wedetermine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, theimpairment is considered other-than-temporary and is recognized in our consolidated statements of operations.InventoryInventory is stated at the lower of cost or net realizable value, with approximate cost being determined on a first-in, first-out basis. Prior to initialapproval from the U.S. Food and Drug Administration (the “FDA”) or other regulatory agencies, we expense costs relating to the production of inventory inthe period incurred, unless we believe regulatory approval and subsequent commercialization of the product candidate is probable and we expect the futureeconomic benefit from sales of the product to be realized, at which point we capitalize the costs as inventory. We assess the costs capitalized prior toregulatory approval each quarter for indicators of impairment, such as a reduced likelihood of approval. We expense costs associated with clinical trialmaterial as research and development expense.105Table of ContentsOn a quarterly basis, we analyze our inventory levels to determine whether we have any obsolete, expired, or excess inventory. If any inventory isexpected to expire prior to being sold, has a cost basis in excess of its net realizable value, is in excess of expected sales requirements as determined byinternal sales forecasts, or fails to meet commercial sale specifications, the inventory is written-down through a charge to cost of product sales. Thedetermination of whether inventory costs will be realizable requires estimates by management of future expected inventory requirements, based on salesforecasts. Once packaged, our products have a shelf-life ranging from three to five years. As a result of comparison to internal sales forecasts, we expect tofully realize the carrying value of our finished goods inventory. If actual market conditions are less favorable than those projected by management, inventorywrite-downs may be required. Charges for inventory write-downs are not reversed if it is later determined that the product is saleable.Restricted CashWe classified $0.5 million of our cash as restricted cash, a non-current asset on the balance sheet, as of December 31, 2018 and 2017. This amountrepresented the security deposit delivered to the landlord of our Waltham, Massachusetts headquarters.Concentrations and Significant Customer InformationFinancial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities,and accounts receivable. We currently hold our excess cash primarily in institutional money market funds, corporate debt securities, U.S. treasury andgovernment agency securities, commercial paper and certificates of deposit. As of December 31, 2018, we did not have a material concentration in any singleinvestment.Our operations are located entirely within the U.S. We focus primarily on developing, manufacturing, and commercializing our products and productcandidates. The following table sets forth customers who represented 10% or more of our total revenues for 2018, 2017 and 2016: Years Ended December 31, 201820172016AmerisourceBergen Drug Corporation27% 26% 27%McKesson Corporation26% 24% 14%Caremark, LLC< 10%< 10%10% Our net accounts receivable primarily represent amounts due for products sold directly to wholesalers, distributors, specialty pharmacies and ourauthorized generic partner. Accounts receivable for our products are recorded net of reserves for estimated chargeback obligations, prompt payment discountsand any allowance for doubtful accounts.As part of our credit management policy, we perform ongoing credit evaluations of our customers, and we generally do not require collateral. If thefinancial condition of any of our significant product sales customers was to deteriorate and result in an impairment of its ability to make payments owed tous, an allowance for doubtful accounts may be required which could have a material effect on earnings in the period of any such adjustment. We did notexperience any significant bad debts and have not established an allowance for doubtful accounts as of December 31, 2018 and 2017.At December 31, 2018 and 2017, three and two customers, respectively, accounted for 10% or more of our accounts receivable balance, representingapproximately 73% and 57% in the aggregate of our total accounts receivable, respectively. We are currently dependent on a single supplier for Feraheme drug substance (produced in two separate facilities) as well as for drug substance and finalpackaging services for Intrarosa. In addition, we currently have a single supplier for our auto-injector product. We have been and may continue to be exposedto a significant loss of revenue from the sale of our products in the event that our suppliers and/or manufacturers are not able to fulfill demand for any reason.106Table of ContentsProperty and Equipment, NetProperty and equipment are recorded at cost and depreciated when placed into service using the straight-line method based on their estimated usefullives as follows: Useful LifeComputer equipment and software5 YearsFurniture and fixtures5 YearsLeasehold improvementsLesser of Lease or Asset LifeLaboratory and production equipment5 Years / 8 YearsCosts for capital assets not yet placed in service are capitalized on our balance sheets and will be depreciated in accordance with the above guidelinesonce placed into service. Costs for maintenance and repairs are expensed as incurred. Upon sale or other disposition of property and equipment, the cost andrelated depreciation are removed from the accounts and any resulting gain or loss is charged to our consolidated statements of operations. Long-lived assetsto be held and used are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not berecoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventualdisposition. In the event such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to theirestimated fair values. Assets classified as held for sale are no longer subject to depreciation and are recorded at the lower of carrying value or estimated netrealizable value.Business Combinations and Asset AcquisitionsThe purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price tothe identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Under Accounting Standards Update(“ASU”) No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business (“2017-01”), we first determine whether substantially allof the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, thesingle asset or group of assets, as applicable, is not a business.We account for acquired businesses using the acquisition method of accounting, under which the total purchase price of an acquisition is allocated to thenet tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired isrecorded as goodwill.The purchase price allocations are initially prepared on a preliminary basis and are subject to change as additional information becomes availableconcerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocations are made as soon aspracticable but no later than one year from the acquisition date.Acquired inventory is recorded at its fair value, which may require a step-up adjustment to recognize the inventory at its expected net realizable value.The inventory step-up is recorded to cost of product sales in our consolidated statements of operations when related inventory is sold, and we record step-upcosts associated with clinical trial material as research and development expense.Acquisition-Related Contingent ConsiderationContingent consideration arising from a business combination is included as part of the purchase price and is recognized at its estimated fair value as ofthe acquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until thecontingency is resolved. These changes in fair value are recognized in selling, general and administrative expenses in our consolidated statements ofoperations. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time. Forasset acquisitions, we record contingent consideration for obligations we consider to be probable and estimable and these liabilities are not adjusted to fairvalue.GoodwillWe test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and107Table of Contentscircumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairmentand trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic and market conditions, including asignificant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverseaction or assessment by a regulator. Our annual impairment test date is October 31. We have determined that we operate in a single operating segment andhave a single reporting unit.In performing our goodwill impairment tests during 2018 and 2017, we utilized the approach prescribed under Accounting Standards Codification(“ASC”) 350, as amended by ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”),which requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. For additionalinformation, see Note I, “Goodwill and Intangible Assets, Net.”Intangible AssetsWe amortize our intangible assets that have finite lives based on either the straight-line method, or if reliably determinable, based on the pattern in whichthe economic benefit of the asset is expected to be utilized. When such facts and circumstances exist, management compares the projected undiscountedfuture cash flows associated with the asset over its estimated useful life against the carrying amount. The impairment loss, if any, is measured as the excess ofthe carrying amount of the asset over its fair value.If we acquire a business as defined under applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If we acquire anasset or a group of assets that do not meet the definition of a business, then the acquired IPR&D is expensed on its acquisition date. Future costs to developthese assets are recorded to research and development expense as they are incurred.Acquired IPR&D represents the fair value assigned to research and development assets that we acquire and have not been completed at the acquisitiondate. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheets at the acquisition-date fair value and isdetermined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the projects, anddiscounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or morefrequently if indicators of impairment are present, until the project is completed or abandoned. If we determine that IPR&D becomes impaired or isabandoned, the carrying value is written down to its fair value with the related impairment charge recognized in our consolidated statement of operations inthe period in which the impairment occurs. Upon successful completion of each project and launch of the product, we will make a separate determination ofthe estimated useful life of the IPR&D intangible asset and the related amortization will be recorded as an expense prospectively over its estimated useful life.The projected discounted cash flow models used to estimate our IPR&D reflect significant assumptions regarding the estimates a market participantwould make in order to evaluate a drug development asset, including the following:•Probability of successfully completing clinical trials and obtaining regulatory approval;•Market size, market growth projections, and market share;•Estimates regarding the timing of and the expected costs to advance our clinical programs to commercialization;•Estimates of future cash flows from potential product sales; and•A discount rate.Additionally, to the extent we acquire other indefinite-lived intangible assets through our business combinations, these assets are reviewed forimpairment on an annual basis or more frequently if indicators of impairment are present. If we determine that the asset becomes impaired, the carrying valueis written down to its fair value with the related impairment charge recognized in our consolidated statements of operations in the period in which theimpairment occurs.108Table of ContentsPatentsWe expense all patent-related costs in selling, general and administrative expenses as incurred.Revenue RecognitionEffective January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transitionmethod. We recognized the cumulative effect of applying the new revenue standard to all contracts with customers that were not completed as of January 1,2018 as an adjustment of $1.1 million to the opening balance of stockholders’ equity at the beginning of 2018. The adjustment recorded was for incrementalcontract acquisition costs related to the CBR business. The comparative information has not been restated and continues to be reported under the accountingstandards in effect for the periods presented. This standard applies to all contracts with customers, except for contracts that are within the scope of otherstandards, such as leases, insurance, certain collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as theaccounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cashflows arising from contracts with customers. The adoption of ASC 606 did not have an impact on the amount of reported revenues with respect to our productrevenue. See Note D, “Revenue Recognition” for additional information.Research and Development ExpensesResearch and development expenses include both external and internal expenses. External expenses primarily include costs of clinical trials and feespaid to contract research organizations (“CROs”), clinical supply and manufacturing expenses, regulatory filing fees, consulting and professional fees as wellas other general costs related to the execution of research and development activities. Internal expenses primarily include compensation of employeesengaged in research and development activities. Research and development expenses are expensed as incurred. Manufacturing costs are generally expensedas incurred until a product has received the necessary initial regulatory approval.Advertising CostsAdvertising costs are expensed as incurred and included in selling, general and administrative expenses in our consolidated statements of operations.Advertising costs, including promotional expenses, costs related to trade shows and print media advertising space were $29.8 million, $9.1 million and $4.9million for the years ended December 31, 2018, 2017 and 2016, respectively.Equity-Based CompensationEquity-based compensation cost is generally measured at the estimated grant date fair value and recorded to expense over the requisite service period,which is generally the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we must make certainjudgments about whether employees, officers, directors, consultants and advisers will complete the requisite service period, and reduce the compensationexpense being recognized for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates. Forfeitures are estimated based upon historical experience and adjusted for unusual events such as corporaterestructurings, which can result in higher than expected turnover and forfeitures. If factors change and we employ different assumptions in future periods, thecompensation expense that we record in the future may differ significantly from what we have recorded in the current period.We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. This model requiresthe input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expected volatility of ourstock price over the expected option term and the expected dividend yield over the expected option term and are subject to various assumptions. The fairvalue of awards calculated using the Black-Scholes option pricing model is generally amortized on a straight-line basis over the requisite service period, andis recognized based on the proportionate amount of the requisite service period that has been rendered during each reporting period.We estimate the fair value of our restricted stock units (“RSUs”) whose vesting is contingent upon market conditions, such as total shareholder return,using the Monte-Carlo simulation model. The fair value of RSUs where vesting is contingent upon market conditions is amortized based upon the estimatedderived service period. The fair value of RSUs granted to our employees and directors whose vesting is dependent on future service is determined based uponthe quoted closing market price per share on the date of grant, adjusted for estimated forfeitures.109Table of ContentsWe believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees and directors. Ourequity award valuations are estimates and may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. Theseamounts are subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture ratesand the issuance of new equity-based awards.Income TaxesWe use the asset and liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized forthe estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax bases. A deferred tax asset is established for the expected future benefit of net operating loss (“NOL”) and credit carryforwards. Deferred taxassets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. Avaluation allowance against net deferred tax assets is required if, based on available evidence, it is more likely than not that some or all of the deferred taxassets will not be realized. Significant judgments, estimates and assumptions regarding future events, such as the amount, timing and character of income,deductions and tax credits, are required in the determination of our provision for income taxes and whether valuation allowances are required against deferredtax assets. In evaluating our ability to recover our deferred tax assets, we consider all available evidence, both positive and negative, including the existenceof taxable temporary differences, our past operating results, the existence of cumulative income in the most recent fiscal years, changes in the business inwhich we operate and our forecast of future taxable income. In determining future taxable income, we are responsible for assumptions utilized including theamount of state and federal operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.These assumptions require significant judgment about the forecasts of future taxable income. As of December 31, 2018, we have established a valuationallowance on our net deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporarydifferences would not be available as a source of income to realize the benefits of those deferred tax assets.We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation ofuncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to betaken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position. Weevaluate uncertain tax positions on a quarterly basis and adjust the level of the liability to reflect any subsequent changes in the relevant facts surroundingthe uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact our income taxprovision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in ourconsolidated statement of operations.Comprehensive LossOur comprehensive loss consists of net loss and other comprehensive loss. Other comprehensive loss includes changes in equity that are excluded fromnet loss, which for all periods presented in these consolidated financial statements related to unrealized holding gains and losses on available-for-salemarketable securities, net of tax.Basic and Diluted Net (Loss) Income per ShareWe compute basic net (loss) income per share by dividing net (loss) income by the weighted average number of common shares outstanding during therelevant period. Diluted net (loss) income per common share has been computed by dividing net (loss) income by the diluted number of common sharesoutstanding during the period. Except where the result would be antidilutive to net income, diluted net income per common share would be computedassuming the impact of the conversion of the 2.5% convertible senior notes due in 2019 (the “2019 Convertible Notes”) and the 3.25% convertible seniornotes due in 2022 (the “2022 Convertible Notes”), the exercise of outstanding stock options, the vesting of RSUs, and the exercise of warrants.We have a choice to settle the conversion obligation of our 2022 Convertible Notes and the 2019 Convertible Notes (together, the “Convertible Notes”)in cash, shares or any combination of the two. Our policy is to settle the principal balance of the Convertible Notes in cash. As such, we apply the treasurystock method to these securities and the dilution related to the conversion premium, if any, of the Convertible Notes is included in the calculation of dilutedweighted-average shares outstanding to the extent each issuance is dilutive based on the average stock price during each reporting period being greater thanthe conversion price of the respective Convertible Notes.110Table of ContentsThe dilutive effect of the warrants, stock options and RSUs has been calculated using the treasury stock method.The components of basic and diluted net (loss) income per share for 2018, 2017 and 2016 were as follows (in thousands, except per share data):Years Ended December 31,2018 2017 2016Net (loss) income from continuing operations$(169,339) $(205,153) $2,093Net income (loss) from discontinued operations103,578 5,925 (4,576) Weighted average common shares outstanding34,394 34,907 34,346Effect of dilutive securities: Stock options and RSUs— — 487Shares used in calculating dilutive net loss per share34,394 34,907 34,833 Basic net (loss) income per share: (Loss) income from continuing operations$(4.92)$(5.88) $0.06Income (loss) from discontinued operations3.010.17 (0.13)Total$(1.91) $(5.71) $(0.07) Diluted net (loss) income per share: (Loss) income from continuing operations$(4.92) $(5.88) $0.06Income (loss) from discontinued operations3.01 0.17 (0.13)Total$(1.91) $(5.71) $(0.07) The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the purchase of shares under our employeestock purchase plan, the vesting of RSUs, the exercise of warrants (prior to consideration of the treasury stock method), and the conversion of the ConvertibleNotes, which were excluded from our computation of diluted net (loss) income per share because their inclusion would have been anti-dilutive (inthousands):Years Ended December 31,2018 2017 2016Options to purchase shares of common stock3,7973,5312,590Shares of common stock issuable upon the vesting of RSUs1,1291,070613Warrants1,0081,0087,3822022 Convertible Notes11,695 11,695 —2019 Convertible Notes790 790 7,382Shares of common stock under employee stock purchase plan81 ——36Total18,50018,09418,003 In connection with the issuance of the 2019 Convertible Notes, in February 2014, we entered into convertible bond hedges with certain financialinstitutions. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we arerequired to make upon conversion of the remaining 2019 Convertible Notes. During 2018 and 2017, the average common stock price was below the exerciseprice of the warrants and during 2016, the average common stock price was above the exercise price of the warrants.111Table of ContentsReclassificationCertain prior period amounts have been reclassified to conform to the current year presentation.Business SegmentsWe have determined that we conduct our operations in one business segment: the manufacture, development and commercialization of products for usein treating various conditions, with a focus on maternal and women’s health and anemia management. Long-lived assets consist entirely of property andequipment and are located in the U.S. for all periods presented. C. DISCONTINUED OPERATIONS AND HELD FOR SALEOn August 6, 2018, we completed the sale of our CBR business to GI Partners pursuant to the CBR Purchase Agreement. We received $519.3 million incash at closing and recognized a gain of $87.1 million on the sale during the year ended December 31, 2018. Although we are providing limited transitionalservices related to GI for certain agreed-upon sales and marketing, technology, human resources and finance functions for several months post-closing, we donot expect to have any (and have not had any) significant involvement in the operations of the CBR business following the close of the sale.We determined that the sale of CBR represented a strategic shift that would have a major effect on our business and therefore met the criteria forclassification as discontinued operations at June 30, 2018. All historical operating results for CBR were reflected within discontinued operations in theconsolidated statements of operations for all periods presented. Further, all assets and liabilities associated with CBR were classified as assets and liabilitiesheld for sale in our consolidated balance sheets for the historical period presented.Assets and liabilities held for sale were reflected separately in our consolidated balance sheets and were comprised of the following as of December 31,2018 and 2017 (in thousands): December 31, 2018 2017Assets Current assets: Cash$— $29,259Accounts receivable, net— 12,042Inventories (raw materials)— 2,913Prepaid and other current assets— 1,294Total current assets held for sale— 45,508 Property, plant and equipment, net— 18,092Intangible assets, net— 328,991Goodwill— 216,971Other long-term assets— 496Restricted cash— 161Total long-term assets held for sale— 564,711 Liabilities Current liabilities: Accounts payable— 2,618Accrued expenses— 8,758Deferred revenues, short term— 42,494Total current liabilities held for sale— 53,870 Deferred revenues, long-term— 24,387Deferred tax liabilities— 71,046Other long-term liabilities— 388Total long-term liabilities held for sale$— $95,821112Table of ContentsThe results of operations of the CBR business were classified as discontinued operations for all periods presented in our consolidated financialstatements. The following is a summary of net income (loss) from discontinued operations for the years ended December 31, 2018, 2017 and 2016: Years Ended December 31, 2018 2017 2016Service revenues, net$71,217 $114,177 $99,604Costs and expenses: Cost of services12,559 21,817 20,575Research and development expenses— — 523Selling, general and administrative expenses39,899 81,782 80,402Impairment of intangible assets— — 3,939Restructuring expenses— — 374Total costs and expenses52,458 103,599 105,813Operating income (loss)18,759 10,578 (6,209)Other income (expense)114 (265) —Income (loss) from discontinued operations18,873 10,313 (6,209)Gain on sale of CBR business87,076 — —Income tax expense (benefit)2,371 4,388 (1,633)Net income (loss) from discontinued operations$103,578 $5,925 $(4,576)The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows. For theyears ended December 31, 2018 and 2017, capital expenditures related to the CBR business were $1.6 million and $4.9 million, respectively. Depreciationand amortization expense related to the CBR business for the same periods was $8.4 million and $21.7 million, respectively. Excluding the gain of $87.1million recognized on the sale of the CBR business and the related transaction expenses of $14.1 million presented in the Consolidated Statements of CashFlows for the year ended December 31, 2018, there were no other significant operating or investing non-cash items related to the CBR business for eitherperiod presented.D. REVENUE RECOGNITIONOn January 1, 2018, we adopted ASC 606 applying the modified retrospective transition method to all contracts that were not completed as of January 1,2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continueto be reported under the accounting standards in effect for prior periods. There was no impact to revenue for the year ended December 31, 2018 as a result ofadoption.Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the considerationwhich we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within thescope of ASC 606, we perform the following five steps:a.Identify the contract(s) with a customer;b.Identify the performance obligations in the contract;c.Determine the transaction price;d.Allocate the transaction price to the performance obligations in the contract; ande.Recognize revenue when (or as) the performance obligations are satisfied.We only apply the five step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods orservices we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or servicespromised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We thenrecognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation issatisfied.113Table of ContentsOur major sources of revenue during the reporting periods were product revenues from Makena (including both our branded and unbranded products),Feraheme and Intrarosa. The adoption of ASC 606 did not have an impact on the pattern or timing of recognition of our product revenue, as the majority ofour product revenue continues to be recognized when the customer takes control of our product.Revenue and AllowancesThe following table provides information about disaggregated revenue by products for the years ended December 31, 2018, 2017 and 2016 (inthousands): Years Ended December 31, 2018 2017 2016Product sales, net Makena$322,265 $387,158 $334,050Feraheme135,001 105,930 97,058Intrarosa16,218 1,816 —MuGard368 741 1,062Total$473,852 $495,645 $432,170Total gross product sales were offset by product sales allowances and accruals for the years ended December 31, 2018, 2017 and 2016 as follows (inthousands): Years Ended December 31, 2018 2017 2016Gross product sales$974,330 $920,061 $748,839Provision for product sales allowances and accruals: Contractual adjustments387,540 310,588 229,686Governmental rebates112,938 113,828 86,983Total500,478 424,416 316,669Product sales, net$473,852 $495,645 $432,170114Table of ContentsThe following table summarizes the product revenue allowance and accrual activity for the years ended December 31, 2018, 2017 and 2016 (inthousands): Contractual Governmental Adjustments Rebates TotalBalance at January 1, 2016$30,177 $25,767 $55,944Current provisions relating to sales in current year224,894 93,035 317,929Adjustments relating to sales in prior years(2,348) (6,052) (8,400)Payments/returns relating to sales in current year(181,150) (41,636) (222,786)Payments/returns relating to sales in prior years(23,973) (19,715) (43,688)Balance at December 31, 201647,600 51,399 98,999Current provisions relating to sales in current year314,537 112,167 426,704Adjustments relating to sales in prior years(3,949) 1,661 (2,288)Payments/returns relating to sales in current year(253,545) (61,569) (315,114)Payments/returns relating to sales in prior years(42,479) (53,060) (95,539)Balance at December 31, 201762,164 50,598 112,762Provisions related to current period sales389,861 105,034 494,895Adjustments related to prior period sales(2,330) 7,903 5,573Payments/returns relating to current period sales(333,694) (75,920) (409,614)Payments/returns relating to prior period sales(58,802) (58,501) (117,303)Balance at December 31, 2018$57,199 $29,114 $86,313We receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to considerationbecomes unconditional.Performance Obligations and Product RevenueAt contract inception, we assess the goods promised in our contracts with customers and identify a performance obligation for each promise to transfer tothe customer a good (or bundle of goods) that is distinct. To identify the performance obligations, we consider all of the goods promised in the contractregardless of whether they are explicitly stated or are implied by customary business practices. We determined that the following distinct goods representseparate performance obligations:•Supply of Makena (branded and unbranded) product•Supply of Feraheme product•Supply of Intrarosa productWe principally sell our products to wholesalers, specialty distributors, specialty pharmacies and other customers, including our authorized genericpartner (collectively, “Customers”), who purchase products directly from us. Our Customers subsequently resell the products to healthcare providers andpatients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payers that provide forgovernment-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products.For the majority of our Customers, we transfer control at the point in time when the goods are delivered. In instances when we perform shipping andhandling activities, these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collectedfrom Customers and remitted to governmental authorities are excluded from revenues.115Table of ContentsVariable ConsiderationUnder ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks,discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers.In addition, we estimate variable consideration related to our share of net distributable profits from our authorized generic partner. Variable considerationmust be determined using either an “expected value” or a “most likely amount” method.We record product revenues net of certain allowances and accruals in our consolidated statements of operations. Product sales allowances and accrualsare primarily comprised of both direct and indirect fees, discounts and rebates and provisions for estimated product returns. Direct fees, discounts and rebatesare contractual fees and price adjustments payable to Customers that purchase products directly from us. Indirect fees, discounts and rebates are contractualprice adjustments payable to healthcare providers and organizations, such as certain physicians, clinics, hospitals, group purchasing organizations (“GPOs”),and dialysis organizations that typically do not purchase products directly from us but rather from wholesalers and specialty distributors. Considerationpayable to a Customer, or other parties that purchase goods from a Customer, are considered to be a reduction of the transaction price, and therefore, ofrevenue.Product sales allowances and accruals are based on definitive contractual agreements or legal requirements (such as laws and regulations to providemandatory discounts for sales to government entities) related to the purchase and/or utilization of the product by these entities and are recorded in the sameperiod that the related revenue is recognized. We use the expected value method for estimating variable consideration. We estimate product sales allowancesand accruals using either historical, actual and/or other data, including estimated patient usage, applicable contractual rebate rates, contract performance bythe benefit providers, other current contractual and statutory requirements, historical market data based upon experience of our products and other productssimilar to them, specific known market events and trends such as competitive pricing and new product introductions, current and forecasted Customer buyingpatterns and inventory levels, and the shelf life of our products. As part of this evaluation, we also review changes to federal and other legislation, changes torebate contracts, changes in the level of discounts, and changes in product sales trends. Although allowances and accruals are recorded at the time of productsale, rebates are typically paid out in arrears, one to three months after the sale. The estimate of variable consideration, which is included in the transaction price, may be constrained and is included in the net sales price only to theextent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated withthe variable consideration is subsequently resolved in a future period. Estimating variable consideration and the related constraint requires the use ofsignificant management judgment and actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future varyfrom our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Noamounts were constrained as of December 31, 2018.DiscountsWe typically offer a 2% prompt payment discount to certain customers as an incentive to remit payment in accordance with the stated terms of theinvoice, generally 30 days. Because we anticipate that those customers who are offered this discount will take advantage of the discount, 100% of the promptpayment discount at the time of sale is accrued for eligible customers, based on the gross amount of each invoice. We adjust the accrual quarterly to reflectactual experience.ChargebacksChargeback reserves represent the estimated obligations resulting from the difference between the prices at which we sell our products to wholesalers andthe sales price ultimately paid to wholesalers under fixed price contracts by third-party payers, including governmental agencies. The chargeback estimatesare determined based on actual product sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at the time of resale tothe qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification from the wholesaler.Estimated chargeback amounts are recorded at the time of sale and adjusted quarterly to reflect actual experience.Distributor/Wholesaler and Group Purchasing Organization FeesFees under arrangements with distributors and wholesalers are usually based upon units of product purchased during the prior month or quarter and areusually paid by us within several weeks of the receipt of an invoice from the wholesaler or distributor, as the case may be. Fees under arrangements with GPOsare usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 days after period end. In accordance withASC 606, since the116Table of Contentsconsideration given to the Customer is not for a distinct good or service, the consideration is a reduction of the transaction price of the vendor’s products orservices. We have included these fees in contractual adjustments in the table above. We generally pay such amounts within several weeks of the receipt of aninvoice from the distributor, wholesaler or GPO. Accordingly, we accrue the estimated fee due at the time of sale, based on the contracted price invoiced tothe Customer. We adjust the accrual quarterly to reflect actual experience.Product ReturnsConsistent with industry practice, we generally offer wholesalers, specialty distributors and other customers a limited right to return our products basedon the product’s expiration date. The current shelf-lives or time between manufacture and expiration for products in our portfolio range from three to fiveyears. Product returns are estimated based on the historical return patterns and known or expected changes in the marketplace. We track actual returns byindividual production lots. Returns on lots eligible for credits under our returned goods policy are monitored and compared with historical return trends andrates. We expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the product, the expense to store ourproducts, and/or that our products are readily available for distribution. We record an estimate of returns at the time of sale. If necessary, our estimated rate ofreturns may be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. There were no materialadjustments to our reserve for product returns during the years ended December 31, 2018, 2017 or 2016. To date, our product returns have been relativelylimited; however, returns experience may change over time. We may be required to make future adjustments to our product returns estimate, which wouldresult in a corresponding change to our net product sales in the period of adjustment and could be significant.Sales RebatesWe contract with various private payer organizations, primarily pharmacy benefit managers, for the payment of rebates with respect to utilization of ourproducts. We determine our estimates for rebates, if applicable, based on actual product sales data and our historical product claims experience. Rebateamounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks of notification by the provider. Weregularly assess our reserve balance and the rate at which we accrue for claims against product sales. If we determine in future periods that our actual rebateexperience is not indicative of expected claims, if actual claims experience changes, or if other factors affect estimated claims rates, we may be required toadjust our current accumulated reserve estimate, which would affect net product sales in the period of the adjustment and could be significant.Governmental RebatesGovernmental rebates relate to our reimbursement arrangements with state Medicaid programs. We determine our estimates for Medicaid rebates, ifapplicable, based on actual product sales data and our historical product claims experience. In estimating these reserves, we provide for a Medicaid rebateassociated with both those expected instances where Medicaid will act as the primary insurer as well as in those instances where we expect Medicaid will actas the secondary insurer. Rebate amounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks ofnotification by the Medicaid or provider entity. We regularly assess our Medicaid reserve balance and the rate at which we accrue for claims against productsales. If we determine in future periods that our actual rebate experience is not indicative of expected claims, if actual claims experience changes, or if otherfactors affect estimated claims rates, we may be required to adjust our current Medicaid accumulated reserve estimate, which would affect net product sales inthe period of the adjustment and could be significant.Other DiscountsOther discounts which we offer include voluntary patient assistance programs, such as copay assistance programs, which are intended to providefinancial assistance to qualified commercially insured patients with prescription drug copayments required by payers. The calculation of the accrual forcopay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized asrevenue.E. MARKETABLE SECURITIESAs of December 31, 2018 and 2017, our marketable securities consisted of securities classified as available-for-sale in accordance with accountingstandards which provide guidance related to accounting and classification of certain investments in marketable securities.117Table of ContentsThe following is a summary of our marketable securities as of December 31, 2018 and 2017 (in thousands): December 31, 2018 Gross Gross Estimated Amortized Unrealized Unrealized FairDescription of Securities:Cost Gains Losses ValueShort-term investments:* Corporate debt securities$51,184 $— $(236) $50,948U.S. treasury and government agency securities7,647 — (34) 7,613Commercial paper3,995 — — 3,995Certificates of deposit12,000 — — 12,000Total short-term investments74,826 — (270) 74,556Long-term investments:** Corporate debt securities62,530 52 (433) 62,149U.S. treasury and government agency securities2,742 — (32) 2,710Certificates of deposit1,500 — — 1,500Total long-term investments66,772 52 (465) 66,359Total investments$141,598 $52 $(735) $140,915 December 31, 2017 Gross Gross Estimated Amortized Unrealized Unrealized FairDescription of Securities:Cost Gains Losses ValueShort-term investments:* Corporate debt securities$57,257 $— $(68) $57,189U.S. treasury and government agency securities1,999 — (13) 1,986Commercial paper1,999 — — 1,999Certificates of deposit9,151 — — 9,151Total short-term investments70,406 — (81) 70,325Long-term investments:** Corporate debt securities59,282 1 (320) 58,963U.S. treasury and government agency securities7,381 — (76) 7,305Total long-term investments66,663 1 (396) 66,268Total investments$137,069 $1 $(477) $136,593* Represents marketable securities with a remaining maturity of less than one year.** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our consolidated balance sheets. Impairments and Unrealized Gains and Losses on Marketable SecuritiesWe did not recognize any other-than-temporary impairment losses in our consolidated statements of operations related to our marketable securitiesduring 2018, 2017 and 2016. We considered various factors, including the length of time that each security was in a realized loss position and our ability andintent to hold these securities until recovery of their amortized cost basis occurs. As of December 31, 2018, we have no material losses in an unrealized lossposition for more than one year. Future events may occur, or additional information may become available, which may cause us to identify credit losseswhere we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and may necessitate the recording of futurerealized losses on securities in our portfolio. Significant losses in the estimated fair values of our marketable securities could have a material adverse effect onour earnings in future periods.118Table of ContentsF. FAIR VALUE MEASUREMENTSWe apply the provisions of ASC Topic 820, Fair Value Measurements (“ASC 820”) for our financial assets and liabilities that are re-measured andreported at fair value each reporting period and our nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis.Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. When determining fair value, we consider the principal or most advantageous market in which it would transact and consider assumptionsthat market participants would use when pricing the asset or liability. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair valuemeasurements. Financial assets and liabilities are categorized within the valuation hierarchy based upon the lowest level of input that is significant to themeasurement of fair value. The three levels of the hierarchy are defined as follows:•Level 1- Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.•Level 2 - Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.•Level 3 - Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants woulduse in pricing the asset or liability at the measurement date, including assumptions about risk.The following tables represent the fair value hierarchy as of December 31, 2018 and 2017, for those assets and liabilities that we measure at fair value ona recurring basis (in thousands): Fair Value Measurements at December 31, 2018 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3)Assets: Cash equivalents$71,568 $71,568 $— $—Corporate debt securities113,097 — 113,097 —U.S. treasury and government agency securities10,323 — 10,323 —Commercial paper3,995 — 3,995 —Certificates of deposit13,500 — 13,500 —Total Assets$212,483 $71,568 $140,915 $—Liabilities: Contingent consideration - Lumara Health$— $— $— $—Contingent consideration - MuGard359 — — 359Total Liabilities$359 $— $— $359119Table of Contents Fair Value Measurements at December 31, 2017 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3)Assets: Cash equivalents$4,591 $4,591 $— $—Corporate debt securities116,152 — 116,152 —U.S. treasury and government agency securities9,291 — 9,291 —Commercial paper1,999 — 1,999 —Certificates of deposit9,151 — 9,151 —Total Assets$141,184 $4,591 $136,593 $—Liabilities: Contingent consideration - Lumara Health$49,187 $— $— $49,187Contingent consideration - MuGard898 — — 898Total Liabilities$50,085 $— $— $50,085 Marketable securitiesOur cash equivalents are classified as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in activemarkets and do not have any restrictions on redemption. Our marketable securities are classified as Level 2 assets under the fair value hierarchy as these assetswere primarily determined from independent pricing services, which normally derive security prices from recently reported trades for identical or similarsecurities, making adjustments based upon other significant observable market transactions. At the end of each reporting period, we perform quantitative andqualitative analysis of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completing our analysis, wedid not adjust or override any fair value measurements provided by our pricing services as of December 31, 2018 or 2017. In addition, there were no transfersor reclassifications of any securities between Level 1 and Level 2 during 2018 or 2017.Contingent considerationIn accordance with GAAP, for asset acquisitions, we record contingent consideration for obligations we consider to be probable and estimable and theseliabilities are not adjusted to fair value. As of December 31, 2018, no contingent consideration was recorded in accrued expenses. As of December 31, 2017,$10.0 million of contingent consideration was recorded in accrued expenses and was paid to Endoceutics in April 2018 on the first anniversary of the closingof the license agreement between us and Endoceutics.We recorded contingent consideration related to the November 2014 acquisition of Lumara Health Inc. (“Lumara Health”) for our Makena product andrelated to our June 2013 license agreement for MuGard® Mucoadhesive Oral Wound Rinse (the “MuGard License Agreement”) with AbeonaTherapeutics, Inc. (“Abeona”), under which we acquired the U.S. commercial rights for the management of oral mucositis and stomatitis (the “MuGardRights”).The fair value measurements of contingent consideration obligations and the related intangible assets arising from business combinations are classifiedas Level 3 assets under the fair value hierarchy as these assets have been valued using unobservable inputs. These inputs include: (a) the estimated amountand timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discountrate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in asignificantly lower or higher fair value measurement.120Table of ContentsThe following table presents a reconciliation of contingent consideration obligations related to the acquisition of Lumara Health and the MuGard Rights(in thousands):Balance as of January 1, 2017$147,995Payments made(50,224)Adjustments to fair value of contingent consideration(47,686)Balance as of December 31, 2017$50,085Payments made(119)Adjustments to fair value of contingent consideration(49,607)Balance as of December 31, 2018$359 During 2018, we reduced the fair value of our contingent consideration liability by approximately $49.6 million, primarily based on actual Makena netsales to date and our expectations for future performance, which indicated that achievement of future milestones is not probable. This adjustment was basedon our estimates, which are reliant on a number of external factors as well as the exercise of judgment.The $47.7 million adjustment to the fair value of the contingent consideration liability in 2017 was primarily due to a decrease to the Makenacontingent consideration based on a revision of our long-term forecast of total projected net Makena sales, which impacted both the amount and timing offuture milestone payments. In addition, during 2017, we paid a $50.0 million sales milestone to the former stockholders of Lumara Health and a $0.2 millionroyalty payment for MuGard.The fair value of the contingent milestone payments payable by us to the former stockholders of Lumara Health was determined based on ourprobability-adjusted discounted cash flows estimated to be realized from the net sales of Makena from December 1, 2014 through December 31, 2019.The fair value of the contingent royalty payments payable by us to Abeona under the MuGard License Agreement was determined based on variousmarket factors, including an analysis of estimated sales using a discount rate of approximately 14% as of December 31, 2018. In addition, as of December 31,2018, we estimated that the undiscounted royalty amounts we could pay under the MuGard License Agreement, based on current projections, may range from$0.3 million to $0.6 million over the remainder of the ten year period, which commenced on June 6, 2013, the acquisition date, which is our best estimate ofthe period over which we expect the majority of the asset’s cash flows to be derived. We believe the estimated fair values of the contingent payments associated with Lumara Health and the MuGard Rights are based on reasonableassumptions, however, our actual results may vary significantly from the estimated results.DebtWe estimate the fair value of our debt obligations by using quoted market prices obtained from third-party pricing services, which is classified as a Level2 input. As of December 31, 2018, the estimated fair value of the 2022 Convertible Notes and the 2019 Convertible Notes was $294.8 million and $20.9million, respectively, which differed from their carrying values. As of December 31, 2017, the estimated fair value of our 2023 Senior Notes (as definedbelow), the 2022 Convertible Notes and the 2019 Convertible Notes was $463.7 million, $282.9 million and $21.6 million, respectively, which differed fromtheir carrying values. See Note R, “Debt,” for additional information on our debt obligations.G. INVENTORIESOur major classes of inventories were as follows as of December 31, 2018 and 2017 (in thousands): December 31, 2018 2017Raw materials$9,388 $9,505Work in process5,932 4,146Finished goods11,371 20,792Total inventories$26,691 $34,443121Table of ContentsH. PROPERTY AND EQUIPMENT, NETProperty and equipment, net consisted of the following as of December 31, 2018 and 2017 (in thousands): December 31, 2018 2017Computer equipment and software$1,637 $1,401Furniture and fixtures1,737 1,442Leasehold improvements2,938 2,938Laboratory and production equipment6,000 654Construction in progress420 5,068 12,732 11,503Less: accumulated depreciation(5,211) (3,599)Property and equipment, net$7,521 $7,904During 2018, 2017 and 2016, depreciation expense was $1.6 million, $1.2 million, and $0.9 million, respectively.I. GOODWILL AND INTANGIBLE ASSETS, NETGoodwillOur $422.5 million goodwill balance represents goodwill of the continuing business following the goodwill allocation required by the CBR transactiondiscussed in Note C, “Discontinued Operations and Held for Sale.” We determined that CBR met the definition of a business and as a result, in accordancewith ASC 350 - Intangibles - Goodwill and Other (“ASC 350”), allocated goodwill on a relative fair value basis between CBR and the continuing businessfor the purposes of determining the carrying value of CBR. As of December 31, 2018, we had no accumulated impairment losses related to goodwill. We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is morelikely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairmentassessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in marketcapitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator. Ourannual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.In performing our goodwill impairment tests during 2018 and 2017, we utilized the approach prescribed under ASC 350, as amended by ASU 2017-04which requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.When we perform any goodwill impairment test, the estimated fair value of our reporting unit is determined using an income approach that utilizes adiscounted cash flow (“DCF”) model or a market approach, when appropriate, which assesses our market capitalization as adjusted for a control premium, or acombination thereof. The DCF model is based upon expected future after-tax operating cash flows of the reporting unit discounted to a present value using arisk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning (i) future operating performance,including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving theestimated cash flows (ii) the probability of regulatory approvals, and (iii) future economic conditions, all of which may differ from actual future cash flows.These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. Thediscount rate, which is intended to reflect the risks inherent in future cash flow projections, used in the DCF model, is based on estimates of the weightedaverage cost of capital (“WACC”) of market participants relative to our reporting unit. Financial and credit market volatility can directly impact certaininputs and assumptions used to develop the WACC. Any changes in these assumptions may affect our fair value estimate and the result of an impairment test.We believe the discount rates and other inputs and assumptions are consistent with those that a market participant would use. In addition, in order to assessthe reasonableness of the fair value of our reporting unit as calculated under the DCF model, we also compare the reporting unit’s fair value to our marketcapitalization and calculate an implied control premium (the excess sum of the reporting unit’s fair value over its market capitalization). We evaluate theimplied control premium by comparing it to control premiums of recent comparable market122Table of Contentstransactions, as applicable. Throughout 2017, at points during 2018 and as of December 31, 2018 and 2017, our market capitalization was lower than ourstockholders’ equity, or book value. We believe that a market participant buyer would be required to pay a control premium for our business that would coverthe difference between our market capitalization and our book value.As described in the accounting guidance for evaluating long-lived assets for impairment, an entity’s fair value may include a control premium inaddition to the quoted market price to determine the fair value of a single reporting unit entity, as an acquiring entity is often willing to pay more for equitysecurities that give it a controlling interest than an investor would pay for a number of equity securities representing less than a controlling interest. Thisaccounting guidance also indicates that the quoted market price of an individual security need not be the sole measurement basis of the fair value of a singlereporting unit.2018 Impairment Testing ResultsDuring the second quarter of 2018, in conjunction with the goodwill allocation required by the CBR transaction and in accordance with ASC 350, weperformed a goodwill impairment test to assess whether there were indicators that its fair value was less than its carrying value. As a result of this evaluation,we determined that there was no impairment of goodwill at June 30, 2018.On October 31, 2018 (the “measurement date”), we conducted our 2018 annual goodwill impairment test using a market approach to estimate the fairvalue of our reporting unit as of the measurement date. We considered our market capitalization, as adjusted for a control premium, to be one indicator of thefair value of our reporting unit. On October 31, 2018, our stock price closed at $21.50 per share, resulting in a market capitalization of approximately $742million, which was below the carrying amount of our reporting unit as of the measurement date, resulting in an implied control premium of 2%. In the daysfollowing our October 31, 2018 annual testing date, our stock price declined, largely in response to our November 1, 2018 earnings release and Companyupdate. This decline resulted in a market capitalization of approximately $633 million on November 5, 2018, resulting in an implied control premium of20%. During the third quarter of 2018, we obtained an updated control premium analysis that benchmarked average control premiums paid in prior mergerand acquisition transactions among biotechnology and pharmaceutical companies. The analysis indicated that control premiums vary depending on factsand circumstances for each transaction. The range of control premiums observed was between 39% and 96%, with a median of 71%. Management believesthat using this market approach of assessing reasonable control premiums provided a sufficient basis to assess whether the fair value of our reporting unit,including a range of reasonable control premiums, was above its carrying amount. Incorporating control premiums in this range to our October 31, 2018market capitalization of $742 million resulted in a fair value which was at least 36% greater (at the low end of the range) than the carrying amount of our netassets as of October 31, 2018. As a result of this review, we determined that there was no impairment of our goodwill at October 31, 2018.Between October 31, 2018 and December 31, 2018, our stock price continued to fluctuate, with a median closing stock price of $17.84 per share for theperiod from November 1, 2018 through December 31, 2018. The median closing stock price of $17.84 per share resulted in a market capitalization ofapproximately $617 million, which as compared to the $747 million carrying amount of our reporting unit at December 31, 2018 resulted in an impliedcontrol premium of 21%. Incorporating the range of control premiums obtained from the control premium study used in our annual goodwill impairment testat October 31, 2018 to the calculated market capitalization of $617 million resulted in a fair value which was at least 15% greater (at the low end of therange) than the carrying amount of our net assets as of December 31, 2018. Using the closing stock price of $15.19 per share on December 31, 2018 results inan implied control premium of 41%. This implied control premium is within the range of control premiums observed. As a result of this review, wedetermined that there was no impairment of our goodwill between our annual goodwill impairment test date and December 31, 2018. In addition, wedetermined that there were no other indicators of impairment through December 31, 2018 requiring further assessment.2017 Impairment Testing ResultsDuring the third quarter of 2017, we determined that the significant reduction in the long-term forecasted cash flows of our largest product, Makena,which led to a $319.2 million impairment of the Makena base technology intangible asset, was an indicator that an interim impairment test of goodwill wasnecessary at September 30, 2017. We performed a quantitative goodwill impairment test at September 30, 2017 in accordance with ASU 2017-04, to bothassess whether a goodwill impairment existed and if so, the amount of the impairment loss. We considered our market capitalization, as adjusted for a controlpremium, to be one indicator of the fair value of our reporting unit. On September 30, 2017, our stock price closed at $18.45, resulting in a marketcapitalization of approximately $653.0 million, which was 18% below the carrying amount of the reporting unit as of September 30, 2017.During the third quarter of 2017, we obtained a control premium analysis which benchmarked average control premiums paid in prior merger andacquisition transactions among biotechnology and pharmaceutical companies. The analysis indicated123Table of Contentsthat control premiums vary depending on facts and circumstances for each transaction. The range of control premiums observed was between 30% and 83%,with a mean of 64%. Management believes that using this market approach of assessing reasonable control premiums provided a sufficient basis to assesswhether the fair value of our reporting unit, including a range of reasonable control premiums, was above its carrying amount as of September 30, 2017.Incorporating control premiums in this range to our September 30, 2017 market capitalization of $653.0 million resulted in a fair value which was at least 6%greater (at the low end of the range) than the carrying amount of our net assets as of September 30, 2017. As a result of this review, we determined that therewas no impairment of our goodwill at September 30, 2017.On October 31, 2017 (the “measurement date”), we conducted our 2017 annual goodwill impairment test using an income approach, specifically a DCFmodel, and a market approach to estimate the fair value of our reporting unit as of the measurement date. We used a range of discount rates between 10.0%and 19.5% across our commercial products and product candidates, which resulted in a weighted average discount rate of 13.6% to determine the fair value ofour reporting unit. We believe the discount rate and other inputs and assumptions are consistent with those that a market participant would use. In addition,we believe we utilized reasonable estimates and assumptions about future revenues, cost projections, and cash flows as of the measurement date. As acorroborating step in our 2017 annual impairment assessment, we compared our implied control premium, as determined by the difference between the fairvalue of our reporting unit as estimated by our DCF analysis and our market capitalization, to control premiums of recent comparable market transactions.The results indicated that the implied control premium was within the range of control premiums observed in prior merger and acquisition transactionsamong biotechnology and pharmaceutical companies. We believe that using this market approach further corroborated our DCF fair value assessment atOctober 31, 2017. As a result of our DCF analysis, we determined that the fair value of our reporting unit exceeded its carrying value by 18% and as such, noimpairment was recorded as of October 31, 2017. In performing a sensitivity analysis, had we increased the weighted average discount rate by 1%, the fairvalue of the reporting unit would have still exceeded the carrying value. In addition, we determined that there were no other indicators of impairment throughDecember 31, 2017 requiring further assessment.Assumptions related to revenue, growth rates and operating margin are based on management’s annual and ongoing forecasting, budgeting and planningprocesses and represent our best estimate of the future results of operations across the company as of that point in time. These estimates are subject to manyassumptions, such as the economic environment in which our reporting unit operates, expectations of regulatory approval of our products in development orunder review with the FDA, demand for our products and competitor actions. If we were to apply different assumptions, or if the outcome of regulatory orother developments, or actual demand for our products and competitor actions, are inconsistent with our assumptions, our estimated discounted future cashflows and the resulting estimated fair value of our reporting unit would increase or decrease, and could result in the fair value of our reporting unit being lessthan its carrying value in an impairment test.Intangible Assets December 31, 2018 December 31, 2017 Cost AccumulatedAmortization Impairments Net Cost AccumulatedAmortization Impairments NetAmortizable intangible assets: Makena base technology$797,100 $400,495 $319,246 $77,359 $797,100 $255,754 $319,246 $222,100Makena auto-injector developedtechnology79,100 6,952 — 72,148 — — — —Intrarosa developed technology77,655 10,129 — 67,526 77,655 3,376 — 74,279 953,855 417,576 319,246 217,033 874,755 259,130 319,246 296,379Indefinite-lived intangible assets: Makena IPR&D— — — — 79,100 — — 79,100Total intangible assets$953,855 $417,576 $319,246 $217,033 $953,855 $259,130 $319,246 $375,479The Makena base technology and IPR&D intangible assets were acquired in November 2014 in connection with our acquisition of Lumara Health.During the first quarter of 2018, following the FDA approval of Makena for administration via a pre-filled subcutaneous auto-injector (the “Makena auto-injector”), we reclassified the Makena IPR&D as the Makena auto-injector developed technology and placed it into service. Amortization of the Makenaauto-injector developed technology is being recognized on a straight-line basis over 8.8 years.During the third quarter of 2017, we received new information from a variety of sources, including from external consulting firms and our authorizedgeneric partner, regarding the potential competitive landscape for the Makena intramuscular (“IM”) product (the “Makena IM product”) upon loss of orphandrug exclusivity in February 2018. The124Table of Contentsinformation received from one of our external consulting firms included competitive intelligence information, which indicated that several genericmanufacturers had either likely filed an Abbreviated New Drug Application (“ANDA”) with the FDA in the third quarter of 2017 or were likely to file anANDA in the fourth quarter of 2017. During the third quarter of 2017, we also began negotiations with our own authorized generic partner and gainedindustry insight into how the competitive landscape of the market might evolve once multiple generics entered. This information, combined with continuedprogress on our own authorized generic strategy, was incorporated into our revised long-range revenue forecasts for the Makena IM product during the thirdquarter of 2017. This new information received in the third quarter, altered our previous assumptions, including the potential number of generic entrants andpotential timing of entry following the loss of its orphan drug exclusivity, which significantly impacted our long-term revenue forecast for the Makena IMproduct.We determined that the revised long-term forecast resulting from the information received in the third quarter of 2017 constituted a triggering event withrespect to our Makena base technology intangible asset, which relates solely to the Makena IM product. We estimated that the sum of the undiscountedprojected cash flows of the Makena IM product was less than the carrying value of the corresponding intangible asset. Therefore, we reassessed the fair valueof the Makena base technology intangible asset using an income approach, a Level 3 measurement technique. We determined that as of September 30, 2017,the fair value of the Makena base technology intangible asset was less than the carrying value and accordingly, we recorded an impairment charge of $319.2million, which was recorded within a separate operating expense line item in our consolidated statements of operations.Amortization of the Makena base technology asset is being recognized using an economic consumption model. Prior to the third quarter of 2017, thisasset was being amortized over 20 years from the acquisition date, which we believed was an appropriate amortization period. During the third quarter of2017, we reassessed the remaining useful life of the Makena base technology intangible asset. Based on the revised long-term forecast for the Makena IMproduct, we believe that the substantive period of revenue from the Makena IM asset will be through 2024 and thus concluded that seven years is anappropriate amortization period based on its revised estimated remaining economic life. Accordingly, we prospectively adjusted the remaining useful life ofthe Makena base technology intangible asset to seven years.Further, during the third and fourth quarters of 2017, we evaluated our Makena IPR&D intangible asset, which is related to the Makena auto-injector, forimpairment and concluded that its fair value was greater than its carrying value, and therefore it was not impaired.The Intrarosa developed technology was acquired in April 2017 from Endoceutics. Amortization of the Intrarosa developed technology is beingrecognized on a straight line basis over 11.5 years.The MuGard Rights were acquired from Abeona in June 2013. Amortization of the MuGard Rights was being recognized using an economicconsumption model over ten years from the acquisition date, which represented our best estimate of the period over which we expected the majority of theasset’s cash flows to be derived. During 2016, based on our determination that the fair value of the net MuGard Rights intangible asset was below its bookvalue, we recorded an impairment charge for the full $15.7 million net intangible asset. As of December 31, 2018, the weighted average remaining amortization period for our finite-lived intangible assets was approximately 7.5 years. Totalamortization expense for 2018, 2017 and 2016, was $158.4 million, $130.4 million and $72.3 million, respectively. Amortization expense for the Makenabase technology, Intrarosa developed technology, and the MuGard Rights is recorded in cost of product sales in our consolidated statements of operations.We expect amortization expense related to our finite-lived intangible assets to be as follows (in thousands):Period EstimatedAmortizationExpenseYear Ending December 31, 2019 $41,891Year Ending December 31, 2020 37,123Year Ending December 31, 2021 31,022Year Ending December 31, 2022 27,972Year Ending December 31, 2023 18,207Thereafter 60,818Total $217,033125Table of ContentsJ. CURRENT AND LONG-TERM LIABILITIESAccrued ExpensesAccrued expenses consisted of the following as of December 31, 2018 and 2017 (in thousands): December 31, 2018 2017Commercial rebates, fees and returns$80,520 $101,852Professional, license, and other fees and expenses23,242 23,657Salaries, bonuses, and other compensation22,482 15,882Interest expense1,067 13,525Intrarosa-related license fees— 10,000Accrued research and development2,226 1,816Total accrued expenses$129,537 $166,732K. INCOME TAXESFor the years ended December 31, 2018, 2017, and 2016, all of our profit or loss before income taxes was from U.S. operations. The income tax expense(benefit) consisted of the following (in thousands): Years Ended December 31, 2018 2017 2016Current: Federal$(1,136) $2,162 $—State1,469 5,358 4,169Total current$333 $7,520 $4,169Deferred: Federal$42,886 $(172,048) $11,208State(3,565) (10,726) (2,206)Total deferred$39,321 $(182,774) $9,002Total income tax expense (benefit)$39,654 $(175,254) $13,171The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate from continuing operations was as follows: Years Ended December 31, 2018 2017 2016Statutory U.S. federal tax rate21.0 % 35.0 % 35.0 %State taxes, net of federal benefit4.7 3.3 5.4Impact of 2017 tax reform on deferred tax balance— 4.6 —Equity-based compensation expense(1.5) (0.8) 16.2Contingent consideration7.2 4.4 41.5Other permanent items, net(1.4) (0.5) 11.9Tax credits6.2 0.7 (19.2)Write-down of acquired state net operating losses— — 67.7Valuation allowance(67.4) (0.8) (68.3)Other, net0.6 0.2 (3.9)Effective tax rate(30.6)% 46.1 % 86.3 %For the year ended December 31, 2018, we recognized income tax expense of $39.7 million, representing an effective tax rate of (30.6)%. The differencebetween the expected statutory federal tax rate of 21.0% and the effective tax rate of (30.6)% for the year ended December 31, 2018, was primarilyattributable to the establishment of a valuation allowance on net deferred126Table of Contentstax assets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by abenefit from contingent consideration associated with Lumara Health, state income taxes and orphan drug tax credits. We have established a valuationallowance on our deferred tax assets other than refundable credits to the extent that our existing taxable temporary differences would not be available as asource of income to realize the benefits of those deferred tax assets. The valuation allowance on our deferred tax assets, other than refundable AMT credits,increased during the year ended December 31, 2018 primarily because the deferred tax liabilities associated with the CBR business, which was reclassified todiscontinued operations and sold during the year ended December 31, 2018, are no longer available as a source of income to realize the benefits of the netdeferred tax assets.On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”), was enacted. The 2017 Tax Act includes significant changes to the U.S.corporate income tax system, including a reduction of the federal corporate income tax rate from 35.0% to 21.0%, effective January 1, 2018. Deferred taxassets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. As aresult of the reduction in the federal tax rate from 35.0% to 21.0%, we revalued our ending net deferred tax liabilities at December 31, 2017 and recognized aprovisional $17.6 million tax benefit.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allowed us to record provisional amounts for theimpact of the 2017 Tax Act during a measurement period which is similar to the measurement period used when accounting for business combinations.During the year ended December 31, 2018, we completed our accounting for the enactment date income tax effects of the 2017 Tax Act in accordance withSAB 118 and recorded immaterial adjustments as a result.For the year ended December 31, 2017, we recognized an income tax benefit of $175.3 million representing an effective tax rate of 46.1%. The differencebetween the expected statutory federal tax rate of 35.0% and the 46.1% effective tax rate for 2017 was primarily attributable to the impact of the 2017 federaltax reform legislation, as discussed above, contingent consideration associated with Lumara Health, federal research and orphan drug tax credits generatedduring the year, and the impact of state income taxes, partially offset by equity-based compensation expenses and an increase to our valuation allowance.For the year ended December 31, 2016, we recognized income tax expense of $13.2 million representing an effective tax rate of 86.3%. The differencebetween the statutory tax rate and the effective tax rate was primarily attributable to the impact of contingent consideration associated with Lumara Health,equity-based compensation expenses and other permanent items, including meals and entertainment expense, officer compensation and Makena-relatedexpenses, partially offset by the benefit of the federal research and development and orphan drug tax credits generated during the year. The effective tax ratefor the year ended December 31, 2016 reflected the significance of these permanent differences in relation to the pre-tax income for the year ended December31, 2016. As a result of state tax planning during 2016, we analyzed the acquired state net operating losses (“NOLs”) and determined that a significantportion were not utilizable and should be written down. This write-down was offset with a decrease in the valuation allowance as we had previouslydetermined that it was more likely than not that these NOLs would not be utilized.127Table of ContentsDeferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets andliabilities using future enacted rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferredtax assets will not be realized. The components of our deferred tax assets and liabilities were as follows (in thousands): December 31, 2018 2017Assets Net operating loss carryforwards$46,888 $60,308Tax credit carryforwards24,290 15,577Capital loss carryforwards20,896 —Interest expense carryforwards4,318 —Equity-based compensation expense5,931 5,873Capitalized research & development4,635 7,872Intangible assets12,565 —Reserves2,683 3,342Contingent consideration87 1,406Other5,389 5,971Valuation allowance(113,278) (4,740)Liabilities Property, plant and equipment depreciation(614) (198)Intangible assets and inventory— (32,406)Debt instruments(12,489) (15,744)Other(41) (141)Net deferred tax assets$1,260 $47,120The valuation allowance increased by approximately $108.5 million for the year ended December 31, 2018. We have established a valuation allowanceon our deferred tax assets other than refundable AMT credits to the extent that our existing taxable temporary differences would not be available as a sourceof income to realize the benefits of those deferred tax assets. Our valuation allowance on our deferred tax assets, other than refundable AMT credits, increasedduring the year ended December 31, 2018, primarily because the deferred tax liabilities associated with the CBR business, which was reclassified todiscontinued operations and sold during 2018, are no longer available as a source of income to realize the benefits of the net deferred tax assets.At December 31, 2018, we had federal and state NOL carryforwards of approximately $199.0 million and $92.9 million, respectively, of which $123.1million and $16.6 million federal and state NOL carryforwards, were acquired as part of the Lumara Health transaction, respectively. The federal and stateNOLs expire at various dates through 2038. We have federal tax credits of approximately $23.4 million to offset future tax liabilities of which $2.3 millionwere acquired as part of the Lumara Health transaction. We have state tax credits of $1.2 million to offset future tax liabilities. These federal and state taxcredits will expire periodically through 2038 if not utilized. We have a capital loss carryforward of $90.5 million from the sale of the CBR business that canonly be used to offset future capital gains and expires in 2023. Our interest expense carryforward is $17.8 million, which may be carried forward indefinitely.Utilization of our NOLs, interest expense carryforwards, and research and development (“R&D”) credit carryforwards may be subject to a substantialannual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of theInternal Revenue Code of 1986 (“Section 382”) as well as similar state provisions. These ownership changes may limit the amount of NOLs and interestexpense carryforwards that can be utilized annually to offset future taxable income and may limit the amounts of R&D credit carryforwards that can beutilized annually to offset taxes. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certainshareholders or public groups in the stock of a corporation by more than 50% over a three-year period. Since our formation, we have raised capital throughthe issuance of capital stock on several occasions. These financings, combined with the purchasing shareholders’ subsequent disposition of those shares,could result in a change of control, as defined by Section 382. We conducted an analysis under Section 382 to determine if historical changes in ownershipthrough128Table of ContentsDecember 31, 2018, based upon publicly available information as of December 31, 2018, would limit or otherwise restrict our ability to utilize these NOLs,interest expense, and R&D credit carryforwards. As a result of this analysis, we do not believe there are any significant limitations on our ability to utilizethese carryforwards. The NOLs and tax credits acquired from Lumara health are subject to restrictions under Section 382. These restricted NOLs and creditsmay be utilized subject to an annual limitation. We identified two ownership changes associated with the attributes acquired as part of the Lumara Healthtransaction and determined these attributes are subject to an annual limitation. Future changes in ownership after December 31, 2018 could affect thelimitation in future years and any limitation may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization.Unrecognized tax benefits represent uncertain tax positions for which reserves have been established. A reconciliation of our changes in unrecognizedtax benefits is as follows (in thousands): Years Ended December 31, 2018 2017 2016Unrecognized tax benefits at the beginning of the year$10,560 $13,020 $12,695Additions based on tax positions related to the current year12 574 300Additions for tax positions from prior years608 340 69Subtractions for federal tax reform— (3,296) —Subtractions for tax positions from prior years— (78) (44)Unrecognized tax benefits at the end of the year$11,180 $10,560 $13,020The amount of unrecognized tax benefits that would impact the effective tax rate if recognized is immaterial, as the majority of our uncertain taxpositions relate to NOL and credit carryforwards, which, if recognized, are currently expected to require a full valuation allowance.Our unrecognized tax benefits as of December 31, 2018 increased by $0.6 million as compared to December 31, 2017 primarily due to tax reservesestablished on R&D tax credits.Our unrecognized tax benefits as of December 31, 2017 decreased by $2.5 million as compared to December 31, 2016 primarily due to the change in thefederal tax rate, which reduced the future value of our federal NOLs and the corresponding value of the unrecognized tax benefits related to those NOLs. Thisdecrease was partially offset by tax reserves established on R&D tax credits.Our unrecognized tax benefits as of December 31, 2016 increased by $0.3 million as compared to December 31, 2015 primarily due to tax reservesestablished on R&D tax credits.We have recorded minimal interest or penalties on unrecognized tax benefits since inception. We recognize both accrued interest and penalties related tounrecognized tax benefits in income tax expense. We do not expect our unrecognized tax benefits to change significantly in the next 12 months.The statute of limitations for assessment by the Internal Revenue Service (the “IRS”) and most state tax authorities is closed for tax years prior toDecember 31, 2015, although carryforward attributes that were generated prior to tax year 2015 may still be adjusted upon examination by the IRS or statetax authorities if they either have been or will be used in a future period. We file income tax returns in the U.S. federal and various state jurisdictions. Thereare currently no federal audits in progress. We have two state audits in progress. We do not expect these audits to result in any material impact.129Table of ContentsL. ACCUMULATED OTHER COMPREHENSIVE LOSSThe following table summarizes the changes in the accumulated balances of other comprehensive loss associated with unrealized (losses) gains onsecurities during 2018, 2017 and 2016 (in thousands): December 31, 2018 2017 2016Beginning balance$(3,908) $(3,838) $(4,205)Other comprehensive loss before reclassifications(77) (70) 261Reclassification adjustment for gains included in net loss— — 106Ending balance$(3,985) $(3,908) $(3,838)M. EQUITY-BASED COMPENSATIONWe currently maintain three equity compensation plans, namely our Fourth Amended and Restated 2007 Equity Incentive Plan, as amended (the “2007Plan”), the Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Lumara Health 2013 Plan”) and our 2015 Employee StockPurchase Plan (“2015 ESPP”). All outstanding stock options granted under each of our equity compensation plans other than our 2015 ESPP (discussedbelow) have an exercise price equal to the closing price of a share of our common stock on the grant date. During the fourth quarter of 2017, the thenoutstanding awards under our Amended and Restated 2000 Stock Plan (the “2000 Plan”) expired.Our 2007 Plan was originally approved by our stockholders in November 2007, and succeeded our 2000 Plan, which has expired and under which nofurther grants may be made. Any shares that remained available for issuance under the 2000 Plan as of the date of adoption of the 2007 Plan were included inthe number of shares that were issued under the 2007 Plan. In addition, any shares subject to outstanding awards granted under the 2000 Plan that expired orterminated for any reason prior to exercise were added to the total number of shares of our stock available for issuance under the 2007 Plan. In June 2018, atour annual meeting of stockholders, our stockholders approved an amendment to our 2007 Plan to, among other things, increase the number of shares of ourcommon stock available for issuance thereunder by 1,043,000 shares. The alloted number of shares available for issuance under the 2007 Plan was10,537,365 as of December 31, 2018 and there were 2,548,513 shares remaining available for future issuance under the 2007 Plan. As of December 31, 2018,all outstanding options under the 2007 Plan have either a seven or ten-year term.In November 2014, we assumed the Lumara Health 2013 Plan in connection with the acquisition of Lumara Health. The total number of shares issuablepursuant to awards under this plan as of the effective date of the acquisition and after taking into account any adjustments as a result of the acquisition, was200,000 shares. As of December 31, 2018, there were 18,242 shares remaining available for issuance under the Lumara Health 2013 Plan, which are availablefor grants to certain employees, officers, directors, consultants, and advisers of AMAG and our subsidiaries who are newly-hired or who previously performedservices for Lumara Health. All outstanding options under the Lumara Health 2013 Plan have a ten-year term.The 2007 Plan and the Lumara Health 2013 Plan provide for the grant of stock options, RSUs, restricted stock, stock, stock appreciation rights and otherequity interests in our company. We generally issue common stock from previously authorized but unissued shares to satisfy option exercises and RSUawards. The terms and conditions of each award are determined by our Board of Directors (the “Board”) or the Compensation Committee of our Board. Theterms and conditions of each award assumed in the acquisition of Lumara Health were previously determined by Lumara Health prior to being assumed inconnection with the acquisition, subject to applicable adjustments made in connection with such acquisition.In May 2015, our stockholders approved our 2015 ESPP, which authorizes the issuance of up to 200,000 shares of our common stock to eligibleemployees. In June 2018, at our annual meeting of stockholders, our stockholders approved an amendment to our 2015 ESPP to increase the maximumnumber of shares of our common stock that will be made available for sale thereunder by 500,000 shares. The terms of the 2015 ESPP permit eligibleemployees to purchase shares (subject to certain plan and tax limitations) in semi-annual offerings through payroll deductions of up to an annual maximumof 10% of the employee’s “compensation” as defined in the 2015 ESPP. Shares are purchased at a price equal to 85% of the fair market value of our commonstock on either the first or last business day of the offering period, whichever is lower. Plan periods consist of six-month periods typically commencing June 1and ending November 30 and commencing December 1 and ending May 31. As of December 31, 2018, 259,776 shares have been issued under our 2015ESPP.During 2018, we also granted equity through inducement grants outside of our equity compensation plans to certain employees to induce them to acceptemployment with us (collectively, “Inducement Grants”). The options were granted at an exercise price equal to the fair market value of a share of ourcommon stock on the respective grant dates and will be130Table of Contentsexercisable in four equal annual installments beginning on the first anniversary of the respective grant dates. The RSU grants will vest in three equal annualinstallments beginning on the first anniversary of the respective grant dates. The foregoing grants were made pursuant to inducement grants outside of ourstockholder approved equity plans as permitted under the NASDAQ Stock Market listing rules. We assessed the terms of these awards and determined therewas no possibility that we would have to settle these awards in cash and therefore, equity accounting was applied.Stock OptionsThe following table summarizes stock option activity during 2018:2007 Equity 2013 Lumara Inducement Plan Equity Plan Grants TotalOutstanding at December 31, 20172,590,373 125,536 815,450 3,531,359Granted1,047,087 35,400 102,393 1,184,880Exercised(150,789) (2,812) — (153,601)Expired or terminated(704,885) (33,674) (107,500) (846,059)Outstanding at December 31, 20182,781,786 124,450 810,343 3,716,579 Restricted Stock UnitsThe following table summarizes RSU activity during 2018:2007 Equity 2013 Lumara Inducement Plan Equity Plan Grants TotalOutstanding at December 31, 2017966,623 11,611 91,541 1,069,775Granted766,869 1,600 48,418 816,887Vested(375,470) (10,650) (52,164) (438,284)Expired or terminated(316,881) (460) (2,502) (319,843)Outstanding at December 31, 20181,041,141 2,101 85,293 1,128,535 In March 2018 and February 2017, we granted RSUs under our 2007 Plan to certain members of our senior management covering a maximum of 206,250and 191,250 shares of common stock, respectively. These performance-based RSUs will vest, if at all, on March 1, 2021 and February 22, 2020, respectively,based on our total shareholder return (“TSR”) performance measured against the median TSR of a defined group of companies over a three-year period. As ofDecember 31, 2018, the maximum shares of common stock that may be issued under these awards was 188,250 and 153,750, respectively. The maximumaggregate total fair value of these RSUs is $3.5 million and $3.1 million, respectively, which is being recognized as expense over a period of three years fromthe date of grant, net of any estimated and actual forfeitures.Equity-based compensation expenseEquity-based compensation expense for 2018, 2017 and 2016 consisted of the following (in thousands): Years Ended December 31, 2018 2017 2016Cost of product sales$802 $884 $511Research and development2,533 3,225 3,475Selling, general and administrative16,614 16,187 15,590Total equity-based compensation expense19,949 20,296 19,576Income tax effect— (6,188) (5,696)After-tax effect of equity-based compensation expense$19,949 $14,108 $13,880 We reduce the compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historical experience,adjusted for unusual events such as corporate restructurings, which may result in higher than expected turnover and forfeitures. Under current accountingguidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.131Table of ContentsThe following table summarizes the weighted average assumptions we utilized for purposes of valuing grants of options to our employees and non-employee directors: Years Ended December 31, 2018 2017 2016 Non-Employee Non-Employee Non-Employee Employees Directors Employees Directors Employees DirectorsRisk free interest rate (%)2.75 2.70 1.86 1.61 1.32 1.10Expected volatility (%)57 59 53 57 49 54Expected option term (years)5.0 4.0 5.0 4.0 5.0 3.0Dividend yieldnone none none none none noneRisk free interest rates utilized are based upon published U.S. Treasury yields at the date of the grant for the expected option term. During 2018, 2017and 2016, we estimated our expected stock price volatility by using the historical volatility of our own common stock price over the prior period equivalentto our expected option term, in order to better reflect expected future volatility. To compute the expected option term, we analyze historical exerciseexperience as well as expected stock option exercise patterns.The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2018: December 31, 2018 Options Weighted AverageExercise Price Weighted AverageRemainingContractual Term Aggregate IntrinsicValue ($ in thousands)Outstanding at beginning of year3,531,359 $28.27 7.2 $—Granted1,184,880 21.14 — —Exercised(153,601) 19.26 — —Expired and/or forfeited(846,059) 35.13 — —Outstanding at end of year3,716,579 $24.81 7.3 $694Outstanding at end of year - vested and unvested expected to vest3,601,519 $24.92 7.2 $690Exercisable at end of year1,928,239 $27.26 5.8 $515The weighted average grant date fair value of stock options granted during 2018, 2017 and 2016 was $10.76, $9.52 and $10.63, respectively. A total of604,886 stock options vested during 2018. The aggregate intrinsic value of options exercised during 2018, 2017 and 2016, excluding purchases madepursuant to our 2015 ESPP, measured as of the exercise date, was approximately $0.6 million, $0.4 million and $1.5 million, respectively. The intrinsic valueof a stock option is the amount by which the fair market value of the underlying stock on a specific date exceeds the exercise price of the common stockoption.The following table summarizes details regarding RSUs granted under our equity incentive plans for the year ended December 31, 2018: December 31, 2018 RestrictedStock Units Weighted AverageGrant Date FairValueOutstanding at beginning of year1,069,775 $26.07Granted816,887 22.32Vested(438,284) 28.25Forfeited(319,843) 22.86Outstanding at end of year1,128,535 $23.42Outstanding at end of year and expected to vest1,060,647 $23.40132Table of ContentsThe weighted average grant date fair value of RSUs granted during 2018, 2017 and 2016 was $22.32, $24.18 and $22.28, respectively. The total fairvalue of RSUs that vested during 2018, 2017 and 2016 was $12.4 million, $12.3 million and $9.1 million, respectively.At December 31, 2018, the amount of unrecorded equity-based compensation expense for both option and RSU awards, attributable to future periods wasapproximately $32.7 million. Of this amount, $16.2 million was associated with stock options and is expected to be amortized on a straight-line basis toexpense over a weighted average period of approximately 2.7 years, $12.6 million was associated with RSUs and is expected to be amortized on a straight-line basis to expense over a weighted average period of approximately 1.8 years, and $3.9 million was associated with performance-based RSUs and isexpected to be amortized on a straight-line basis to expense over a weighted average period of approximately 1.8 years. Such amounts will be amortizedprimarily to research and development or selling, general and administrative expense. These future estimates are subject to change based upon a variety offuture events, which include, but are not limited to, changes in estimated forfeiture rates, employee turnover, and the issuance of new stock options and otherequity-based awards.N. EMPLOYEE SAVINGS PLANWe provide a 401(k) Plan to our employees by which they may defer compensation for income tax purposes under Section 401(k) of the InternalRevenue Code. Each employee may elect to defer a percentage of his or her salary up to a specified maximum. As of December 31, 2018 our 401(k) Planprovided, among other things, for a company contribution of 4% of each employee’s combined salary and certain other compensation for the plan year.Contributions by us to the 401(k) Plan are not taxable to employees until withdrawn from the 401(k) Plan and contributions are deductible by us when made.The amount of our company contribution for the 401(k) Plan was $4.0 million, $2.3 million and $1.6 million for 2018, 2017 and 2016, respectively.O. STOCKHOLDERS’ EQUITYIn January 2016, we announced that our Board authorized a program to repurchase up to $60.0 million in shares of our common stock. The repurchaseprogram does not have an expiration date and may be suspended for periods or discontinued at any time. Under the program, we may purchase our stock fromtime to time at the discretion of management in the open market or in privately negotiated transactions. The number of shares repurchased and the timing ofthe purchases will depend on a number of factors, including share price, trading volume and general market conditions, along with working capitalrequirements, general business conditions and other factors. We may also from time to time establish a trading plan under Rule 10b5-1 of the Securities andExchange Act of 1934 to facilitate purchases of our shares under this program. During 2018, we did not repurchase shares of common stock under thisprogram. During 2017, we repurchased and retired 1,366,266 shares of common stock under this repurchase program for $19.5 million, at an average purchaseprice of $14.27 per share. As of December 31, 2018 and 2017, $20.5 million remains available for the repurchase of shares under the program. P. COMMITMENTS AND CONTINGENCIESCommitmentsOur long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. Theseinclude commitments related to our facility and vehicle leases, purchases of inventory, debt obligations, and other purchase obligations.Lease ObligationsIn June 2013, we entered into a lease agreement with BP Bay Colony LLC (the “Landlord”) for the lease of certain real property located at 1100 WinterStreet, Waltham, Massachusetts (the “Waltham Premises”) for use as our principal executive offices. The initial term of the lease was five years and twomonths with one five-year extension term at our option. We have entered into several amendments to the original lease to add additional space and to extendthe term of the original lease to April 2021. In addition to base rent, we are also required to pay a proportionate share of the Landlord’s operating costs.The Landlord agreed to pay for certain agreed-upon improvements to the Waltham Premises and we agreed to pay for any increased costs due to changesby us to the agreed-upon plans. We record all tenant improvements paid by us as leasehold improvements and amortize these improvements over the shorterof the estimated useful life of the improvement or the remaining life of the initial lease term. Amortization of leasehold improvements is included indepreciation expense.133Table of ContentsIn addition, in connection with our facility lease for the Waltham Premises, the Landlord held a security deposit of $0.5 million in the form of anirrevocable letter of credit which is classified on our balance sheet as a long-term asset as of December 31, 2018 and 2017.We also lease vehicles for our sales employees under a Master Agreement with Enterprise FM Trust. Each vehicle is leased for a three year term,commencing on the delivery date.Rent expense, net of deferred rent amortization, for our leases was $5.1 million, $3.0 million, and $1.6 million for 2018, 2017 and 2016, respectively.Future minimum payments under our non-cancelable leases as of December 31, 2018 are as follows (in thousands):Period Future MinimumLease PaymentsYear Ending December 31, 2019 $5,119Year Ending December 31, 2020 4,075Year Ending December 31, 2021 1,034Year Ending December 31, 2022 —Year Ending December 31, 2023 —Total $10,228Purchase ObligationsPurchase obligations primarily represent minimum purchase commitments for inventory. As of December 31, 2018, our minimum purchase commitmentstotaled $88.7 million.Contingent Consideration Related to Business CombinationsIn connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to $350.0 million based on the achievement of certain salesmilestones, of which $150.0 million has been paid to date. During 2018, we reversed the accrual for a $50.0 million milestone payment based on actualMakena net sales to date and our expectations for future performance, which indicated that achievement of the future milestone was not probable. As weupdate our analysis in future periods, actual results may vary significantly from the estimated results, which are reliant on a number of external factors as wellas the exercise of judgment.Contingent Regulatory and Commercial Milestone PaymentsIn connection with the Endoceutics License Agreement, we are required to pay Endoceutics certain sales milestone payments, including a first salesmilestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0 million and a second milestone paymentof $30.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0million, there are additional sales milestone payments totaling up to $850.0 million, which would be triggered at various sales thresholds. We are alsoobligated to pay tiered royalties to Endoceutics equal to a percentage of net U.S. sales of Intrarosa ranging from mid-teens for calendar year net sales up to$150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion for the commercial life of Intrarosa, with deductions (a) after thelater of (i) the expiration date of the last to expire of a licensed patent containing a valid patent claim or (ii) 10 years after the first commercial sale ofIntrarosa for the treatment of vulvar and vaginal atrophy (“VVA”) or female sexual dysfunction (“FSD”) in the U.S. (as applicable), (b) for generic competitionand (c) for third-party payments, subject to an aggregate cap on such deductions of royalties otherwise payable to Endoceutics.In connection with the license agreement we entered into with Palatin Technologies, Inc. (“Palatin”) in January 2017 (the “Palatin License Agreement”),we are required to pay Palatin up to $380.0 million in regulatory and commercial milestone payments, of which $20.0 million was paid in 2018 following theacceptance by the FDA of our New Drug Application (“NDA”) for Vyleesi. As of December 31, 2018, the remaining potential milestone payments include$60.0 million upon FDA approval of Vyleesi and up to $300.0 million of aggregate sales milestone payments upon the achievement of certain annual netsales over the course of the license. We are also obligated to pay Palatin tiered royalties on annual net sales of Vyleesi and any other products containingVyleesi (collectively “the Vyleesi Products”), on a product-by-product basis, in the Palatin Territory, as defined below, ranging from the high-single digits tothe low double-digits.134Table of ContentsIn September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 withVelo, the terms of which were amended at the time of exercise. Under the terms of the agreement, we paid Velo an upfront option exercise fee of $12.5 millionand are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of AMAG-423. In addition, we are obligated to pay sales milestonepayments to Velo of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and $900.0 million andlow-single digit royalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velo with a third-party, including a $5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable inquarterly installments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-singledigit royalties based on net sales.In connection with a development and license agreement (the “Antares License Agreement”) with Antares Pharma, Inc. (“Antares”), we are required topay royalties to Antares on net sales of the Makena auto-injector commencing on the launch of the Makena auto-injector in a particular country until theMakena auto-injector is no longer sold or offered for sale in such country or the Antares License Agreement is terminated (the “Antares Royalty Term”). Theroyalty rates range from high single digit to low double digits and are tiered based on levels of net sales of the Makena auto-injector and decrease after theexpiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. Antares is also entitled tosales-based milestone payments upon the achievement of certain annual net sales.Employment ArrangementsWe have entered into employment agreements or other arrangements with most of our executive officers and certain other employees, which provide forthe continuation of salary and certain benefits and, in certain instances, the acceleration of the vesting of certain equity awards to such individuals in theevent that the individual is terminated other than for cause, as defined in the applicable employment agreements or arrangements.Indemnification ObligationsAs permitted under Delaware law, pursuant to our certificate of incorporation, by-laws and agreements with all of our current directors, executive officers,and certain of our employees, we are obligated to indemnify such individuals for certain events or occurrences while the officer, director or employee is, orwas, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnificationobligations is not capped. Our director and officer insurance policy limits our initial exposure and our policy provides significant coverage. As a result, webelieve the estimated fair value of these indemnification obligations is likely to be immaterial.We are also a party to a number of other agreements entered into in the ordinary course of business, which contain typical provisions and which obligateus to indemnify the other parties to such agreements upon the occurrence of certain events. Such indemnification obligations are usually in effect from thedate of execution of the applicable agreement for a period equal to the applicable statute of limitations. Our aggregate maximum potential future liabilityunder such indemnification provisions is uncertain. We have not incurred any expenses as a result of such indemnification provisions during the years endedDecember 31, 2018, 2017 or 2016. Accordingly, we have determined that the estimated aggregate fair value of our potential liabilities under suchindemnification provisions is not significant, and we have not recorded any liability related to such indemnification.ContingenciesLegal ProceedingsWe accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonablyestimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel andother relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations orlegal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain mattersreferenced below, the liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, inaccordance with the relevant authoritative guidance, for any matters in which the likelihood of material loss is at least reasonably possible, we will providedisclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect. We expense legalcosts as they are incurred.135Table of ContentsSandoz Patent Infringement LawsuitIn March 2016, we initiated a patent infringement suit regarding an Abbreviated New Drug Application submitted to the FDA by Sandoz Inc. (“Sandoz”)requesting approval to engage in commercial manufacture, use and sale of a generic version of ferumoxytol. On March 23, 2018, we and Sandoz entered astipulation of dismissal in the United States District Court for the District of New Jersey pursuant to a settlement agreement that dismissed and resolved thisaction. According to the terms of the settlement, if Sandoz receives FDA approval by a certain date, Sandoz may launch its generic version of Feraheme onJuly 15, 2021, or earlier under certain circumstances customary for settlement agreements of this nature. Sandoz will pay a royalty on the sales of its genericversion of Feraheme to us until the expiration of the last Feraheme patent listed in the Orange Book. If Sandoz is unable to secure approval by suchdate, Sandoz will launch an authorized generic version of Feraheme on July 15, 2022 for up to twelve months. Sandoz’s right to distribute, and our obligationto supply, the authorized generic product shall be in accordance with standard commercial terms and profit splits.OtherOn July 20, 2015, the Federal Trade Commission (the “FTC”) notified us that it is conducting an investigation into whether Lumara Health or itspredecessor engaged in unfair methods of competition with respect to Makena or any hydroxyprogesterone caproate product. The FTC noted in its letter thatthe existence of the investigation does not indicate that the FTC has concluded that Lumara Health or its predecessor has violated the law and we believe thatour contracts and practices comply with relevant law and policy, including the federal Drug Quality and Security Act (the “DQSA”), which was enacted inNovember 2013, and public statements from and enforcement actions by the FDA regarding its implementation of the DQSA. We have provided the FTC witha response providing a brief overview of the DQSA for context, which we believe was helpful, including: (a) how the statute outlined that large-scalecompounding of products that are copies or near-copies of FDA-approved drugs (like Makena) is not in the interests of public safety; (b) our belief that theDQSA has had a significant impact on the compounding of hydroxyprogesterone caproate; and (c) how our contracts with former compounders allow thosecompounders to continue to serve physicians and patients with respect to supplying medically necessary alternative/altered forms of hydroxyprogesteronecaproate. We believe we have fully cooperated with the FTC and we have had no further interactions with the FTC on this matter since we provided ourresponse to the FTC in August 2015.On or about April 6, 2016, we received Notice of a Lawsuit and Request to Waive Service of a Summons in a case entitled Plumbers’ Local Union No.690 Health Plan v. Actavis Group et. al. (“Plumbers’ Union”), which was filed in the Court of Common Pleas of Philadelphia County, First Judicial District ofPennsylvania and, after removal to federal court, is now pending in the United States District Court for the Eastern District of Pennsylvania (Civ. Action No.16-65-AB). Thereafter, we were also made aware of a related complaint entitled Delaware Valley Health Care Coalition v. Actavis Group et. al. (“DelawareValley”), which was filed with the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania District Court of Pennsylvania(Case ID: 160200806). The complaints name K-V Pharmaceutical Company (“KV”) (Lumara Health’s predecessor company), certain of its successor entities,subsidiaries and affiliate entities (the “Subsidiaries”), along with a number of other pharmaceutical companies. We acquired Lumara Health in November2014, a year after KV emerged from bankruptcy protection, at which time it, along with its then existing subsidiaries, became our wholly-owned subsidiary.We have not been served with process or waived service of summons in either case. The actions are being brought alleging unfair and deceptive tradepractices with regard to certain pricing practices that allegedly resulted in certain payers overpaying for certain of KV’s generic products. On July 21, 2016,the Plaintiff in the Plumbers’ Union case dismissed KV with prejudice to refiling and on October 6, 2016, all claims against the Subsidiaries were dismissedwithout prejudice. We are in discussions with Plaintiff’s counsel to similarly dismiss all claims in the Delaware Valley case. Because the Delaware Valley caseis in the earliest stages and we have not been served with process in this case, we are currently unable to predict the outcome or reasonably estimate the rangeof potential loss associated with this matter, if any.We may periodically become subject to other legal proceedings and claims arising in connection with ongoing business activities, including claims ordisputes related to patents that have been issued or that are pending in the field of research on which we are focused. Other than the above actions, we are notaware of any material claims against us as of December 31, 2018 or 2017. Q. COLLABORATION, LICENSE AND OTHER STRATEGIC AGREEMENTSOur commercial strategy includes expanding our portfolio through the in-license or acquisition of additional pharmaceutical products or companies,including revenue-generating commercial products and development assets. As of December 31, 2018, we were a party to the following collaborations:136Table of ContentsVeloAs described above in Note P, “Commitments and Contingencies,” in September 2018, we exercised our option to acquire the global rights to theAMAG-423 program, which we accounted for as an asset acquisition under ASU No. 2017-01.PrascoIn December 2017, we entered into a Distribution and Supply Agreement (the “Prasco Agreement”) with Prasco, LLC (“Prasco”), under which Prasco wasgranted an exclusive, non-sublicensable, nontranferable license to purchase, distribute and sell a generic version of Makena in the U.S. (the “Makenaauthorized generic”). In July 2018, Prasco launched the Makena authorized generic of both the single-dose and multi-dose intramuscular injections. Underthe Prasco Agreement, we are responsible for the manufacture and supply of the Makena authorized generic to be sold to Prasco at a predetermined supplyprice. Prasco is also required to pay us a certain percentage of the net distributable profits from the sale of the Makena authorized generic. We account forrevenue recognized under the Prasco Agreement in accordance with ASC 606. Pursuant to the terms of the Prasco Agreement, in certain circumstances wehave reimbursed and may be required to reimburse Prasco for additional penalties incurred by Prasco if we fail to supply a certain percentage of productordered by Prasco in a prespecified timeframe. The Prasco Agreement expires on July 2, 2022, which term will be automatically extended thereafter foradditional one year periods, unless canceled by us or Prasco within an agreed upon notice period. The Prasco Agreement is subject to early termination by usfor convenience after a certain period of time or if Prasco is subject to a change of control or by either party for, among other things, uncured breach by orbankruptcy of the other party, lack of commercial viability or FDA notice, or by mutual agreement.AntaresWe are party to the Antares License Agreement, which grants us an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certainintellectual property rights, including know-how, patents and trademarks, to develop, use, sell, offer for sale and import and export the Makena auto-injector.Under the terms of the Antares License Agreement, as amended in March 2018, we are responsible for the clinical development and preparation, submissionand maintenance of all regulatory applications in each country where we desire to market and sell the Makena auto-injector, including the U.S. We arerequired to pay royalties to Antares on net sales of the Makena auto-injector for the Antares Royalty Term. The royalty rates range from high single digit tolow double digits and are tiered based on levels of net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where thereare generic equivalents to the Makena auto-injector being sold in a particular country. In addition, we are required to pay Antares sales milestone paymentsupon the achievement of certain annual net sales. The Antares License Agreement terminates at the end of the Antares Royalty Term, but is subject to earlytermination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party. In March 2018, the Antares LicenseAgreement was amended to, among other things, transfer the agreement to AMAG from our subsidiary, amend certain confidentiality provisions, and toprovide for co-termination with the Antares Manufacturing Agreement (described below).We are also party to a Manufacturing Agreement with Antares (the “Antares Manufacturing Agreement”) that sets forth the terms and conditions pursuantto which Antares agreed to sell to us on an exclusive basis, and we agreed to purchase, the fully packaged Makena auto-injector for commercial distribution.Antares remains responsible for the manufacture and supply of the device components and assembly of the Makena auto-injector. We are responsible for thesupply of the drug to be used in the assembly of the finished auto-injector product. The Antares Manufacturing Agreement terminates at the expiration orearlier termination of the Antares License Agreement, but is subject to early termination by us for certain supply failure situations, and by either party uponan uncured breach by or bankruptcy of the other party or our permanent cessation of commercialization of the Makena auto-injector for efficacy or safetyreasons.EndoceuticsIn February 2017, we entered into the Endoceutics License Agreement with Endoceutics. Pursuant to the Endoceutics License Agreement, Endoceuticsgranted us the right to develop and commercialize pharmaceutical products containing dehydroepiandrosterone (“DHEA”), including Intrarosa, at dosagestrengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding any combinations with other active pharmaceutical ingredients, in theU.S. for the treatment of VVA and FSD. The transactions contemplated by the Endoceutics License Agreement closed on April 3, 2017. We accounted for theEndoceutics License Agreement as an asset acquisition under ASU 2017-01.Upon the closing of the Endoceutics License Agreement, we made an upfront payment of $50.0 million and issued 600,000 shares of unregisteredcommon stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the date of closing. In addition, we paid Endoceutics $10.0million in the third quarter of 2017 upon the delivery by137Table of ContentsEndoceutics of Intrarosa launch quantities and $10.0 million in 2018 following the first anniversary of the closing. In the second quarter of 2017, werecorded a total of $83.5 million of consideration, of which $77.7 million was allocated to the Intrarosa developed technology intangible asset and $5.8million was recorded as IPR&D expense based on their relative fair values.In addition, we also pay tiered royalties to Endoceutics equal to a percentage of net sales of Intrarosa in the U.S. ranging from mid-teens for calendar yearnet sales up to $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion for the commercial life of Intrarosa, withdeductions (a) after the later of (i) the expiration date of the last to expire of a licensed patent containing a valid patent claim or (ii) 10 years after the firstcommercial sale of Intrarosa for the treatment of VVA or FSD in the U.S. (as applicable), (b) for generic competition and (c) for third-party payments, subjectto an aggregate cap on such deductions of royalties otherwise payable to Endoceutics. Endoceutics is also eligible to receive certain sales milestonepayments, including a first sales milestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0 million,and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $300.0 million. If annual net U.S.sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to $850.0 million, which would be triggered at varioussales thresholds.In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women, which is nowfully enrolled. Upon review of the full data set, it will be determined whether to continue to pursue an additional clinical trial to support an eventual filingwith the FDA for an HSDD indication. We have agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding upto $20.0 million, of which we have paid approximately $6.0 million.We have the exclusive right to commercialize Intrarosa for the treatment of VVA and FSD in the U.S., subject to the terms of the Endoceutics LicenseAgreement. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa for the treatment of VVA and, ifapproved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa for the treatment of VVA andFSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to our review and approval and ourright to withhold approval in certain instances. Each party’s commercialization activities and budget are described in a commercialization plan, which isupdated annually.In April 2017, we entered into an exclusive commercial supply agreement with Endoceutics pursuant to which Endoceutics, itself or through affiliates orcontract manufacturers, agreed to manufacture and supply Intrarosa to us (the “Endoceutics Supply Agreement”) and is our exclusive supplier of Intrarosa inthe U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure (as such terms are defined inthe Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceutics has agreed to maintain at all times a second source supplier forthe manufacture of DHEA and the drug product and to identify, validate and transfer manufacturing intellectual property to the second source supplier byApril 2019. The Endoceutics Supply Agreement will generally remain in effect until the termination of the Endoceutics License Agreement.The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordancewith the Endoceutics License Agreement.PalatinIn January 2017, we entered into the Palatin License Agreement with Palatin under which we acquired (a) an exclusive license in all countries of NorthAmerica (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize the Vyleesi Products, an investigationalproduct designed to be a treatment for HSDD in pre-menopausal women, (b) a worldwide non-exclusive license, with the right to grant sub-licenses, tomanufacture the Vyleesi Products, and (c) a non-exclusive license in all countries outside the Palatin Territory, with the right to grant sub-licenses, to researchand develop (but not commercialize) the Vyleesi Products. The transaction closed in February 2017 and was accounted for as an asset acquisition under ASU2017-01.Under the terms of the Palatin License Agreement, in February 2017 we paid Palatin $60.0 million as a one-time upfront payment and subject to agreed-upon deductions reimbursed Palatin approximately $25.0 million for reasonable, documented, out-of-pocket expenses incurred by Palatin in connection withthe development and regulatory activities necessary to submit an NDA in the U.S. for Vyleesi for the treatment of HSDD in pre-menopausal women. During2017, we fulfilled these payment obligations to Palatin. The $60.0 million upfront payment made in February 2017 to Palatin was recorded as IPR&Dexpense as the product candidate had not received regulatory approval. In June 2018, our NDA submission to the FDA for Vyleesi was accepted, whichtriggered a $20.0 million milestone payment, which we paid in the second quarter of 2018 and recorded as an IPR&D expense in the first quarter of 2018when acceptance was deemed probable.138Table of ContentsIn addition, the Palatin License Agreement requires us to make contingent payments of (a) $60.0 million upon FDA approval of Vyleesi, and (b) upto $300.0 million of aggregate sales milestone payments upon the achievement of certain annual net sales milestones over the course of the license. The firstsales milestone payment of $25.0 million will be triggered when Vyleesi annual net sales exceed $250.0 million. We are also obligated to pay Palatin tieredroyalties on annual net sales in North America of the Vyleesi Products, on a product-by-product basis, in the Palatin Territory ranging from the high-singledigits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (a) the earliest dateon which there are no valid claims of Palatin patent rights covering such Vyleesi Product in such country, (b) the expiration of the regulatory exclusivityperiod for such Vyleesi Product in such country and (c) 10 years following the first commercial sale of such Vyleesi Product in such country. These royaltiesare subject to reduction in the event that: (x) we must license additional third-party intellectual property in order to develop, manufacture or commercialize aVyleesi Product or (y) generic competition occurs with respect to a Vyleesi Product in a given country, subject to an aggregate cap on such deductions ofroyalties otherwise payable to Palatin. After the expiration of the applicable royalties for any Vyleesi Product in a given country, the license for such VyleesiProduct in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license. The Palatin License Agreement expires on the date ofexpiration of all royalty obligations due thereunder, unless earlier terminated in accordance with the Palatin License Agreement.AbeonaIn June 2013, we entered into the MuGard License Agreement under which Abeona granted us an exclusive, royalty-bearing license, with the right togrant sublicenses, to certain intellectual property rights, including know-how, patents and trademarks, to use, import, offer for sale, sell, manufacture andcommercialize MuGard in the U.S. and its territories and possessions (the “MuGard Territory”) for the management of oral mucositis/stomatitis (that may becaused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries), including certain ulcers/canker sores andtraumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces.In consideration for the license, we paid Abeona an upfront license fee of $3.3 million in June 2013. We are required to pay royalties to Abeona on netsales of MuGard in the MuGard Territory until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the first commercial sale ofMuGard in the MuGard Territory (the “MuGard Royalty Term”). These tiered, double-digit royalty rates decrease after the expiration of the licensed patents.After the expiration of the MuGard Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in the MuGard Territory.Abeona remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement under which wepurchase MuGard inventory from them. Our inventory purchases are at the price actually paid by Abeona to purchase it from a third-party plus a mark-up tocover administration, handling and overhead.Abeona is responsible for maintenance of the licensed patents at its own expense, and we retain the first right to enforce any licensed patent against third-party infringement. The MuGard License Agreement terminates at the end of the MuGard Royalty Term, but is subject to early termination by us forconvenience and by either party upon an uncured breach by or bankruptcy of the other party.R. DEBTOur outstanding debt obligations as of December 31, 2018 and December 31, 2017 consisted of the following (in thousands): December 31, 2018 20172023 Senior Notes$— $466,2912022 Convertible Notes261,933 248,1942019 Convertible Notes21,276 20,198Total long-term debt283,209 734,683Less: current maturities21,276 —Long-term debt, net of current maturities$261,933 $734,683 2023 Senior NotesIn August 2015, in connection with the CBR acquisition, we completed a private placement of $500 million aggregate principal amount of 7.875%Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes were issued pursuant to139Table of Contentsan Indenture, dated as of August 17, 2015 (the “Indenture”), by and among us, certain of our subsidiaries acting as guarantors of the 2023 Senior Notes andWilmington Trust, National Association, as trustee. In October 2017, we repurchased $25.0 million of the 2023 Senior Notes in a privately negotiatedtransaction, resulting in a loss on extinguishment of debt of $1.1 million. In September 2018, we repurchased the remaining $475.0 million of the 2023Senior Notes at a premium of $28.1 million using the proceeds from the CBR sale, which resulted in a loss on extinguishment of debt of $35.9 million,inclusive of the premium paid.Convertible NotesThe outstanding balances of our Convertible Notes as of December 31, 2018 consisted of the following (in thousands): 2022 ConvertibleNotes 2019 ConvertibleNotes TotalLiability component: Principal$320,000 $21,417 $341,417Less: debt discount and issuance costs, net58,067 141 58,208Net carrying amount$261,933 $21,276 $283,209Gross equity component$72,576 $9,905 $82,481In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components ofour Convertible Notes by allocating the proceeds between the liability component and the embedded conversion option (the “Equity Component”) due toour ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of theliability components was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation wasperformed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The Equity Component of the Convertible Notes wasrecognized as a debt discount and represents the difference between the proceeds from the issuance of the Convertible Notes and the fair value of the liabilityof the Convertible Notes on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount (the“Debt Discount”) is amortized to interest expense using the effective interest method over five years. The Equity Component is not remeasured as long as itcontinues to meet the conditions for equity classification.2022 Convertible NotesIn the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due in 2022 (the “2022 ConvertibleNotes”) and received net proceeds of $310.4 million from the sale of the 2022 Convertible Notes, after deducting fees and expenses of $9.6 million. Theapproximately $9.6 million of debt issuance costs primarily consisted of underwriting, legal and other professional fees, and allocated these costs to theliability and equity components based on the allocation of the proceeds. Of the total $9.6 million of debt issuance costs, $2.2 million was allocated to theEquity Component and recorded as a reduction to additional paid-in capital and $7.4 million was allocated to the liability component and is now recorded asa reduction of the 2022 Convertible Notes in our consolidated balance sheet. The portion allocated to the liability component is amortized to interestexpense using the effective interest method over five years.The 2022 Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the trustee.The 2022 Convertible Notes are senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 andDecember 1 of each year, beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted.Upon conversion of the 2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or acombination thereof, at a conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which correspondsto an initial conversion price of approximately $27.36 per share of our common stock.The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stockdividends and payment of cash dividends. At any time prior to the close of business on the business day immediately preceding March 1, 2022, holders mayconvert their 2022 Convertible Notes at their option only under the following circumstances:1)during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending September 30, 2017, if the lastreported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading daysending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on eachapplicable trading day;140Table of Contents2)during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000principal amount of the 2022 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reportedsale price of our common stock and the conversion rate on each such trading day; or3)upon the occurrence of specified corporate events.On or after March 1, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert all or anyportion of their 2022 Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The2022 Convertible Notes were not convertible as of December 31, 2018.We determined the expected life of the debt was equal to the five-year term on the 2022 Convertible Notes. The effective interest rate on the liabilitycomponent was 9.49% for the period from the date of issuance through December 31, 2018. As of December 31, 2018, the “if-converted value” did notexceed the remaining principal amount of the 2022 Convertible Notes.2019 Convertible NotesIn February 2014, we issued $200.0 million aggregate principal amount of the 2019 Convertible Notes. We received net proceeds of $193.3 million fromthe sale of the 2019 Convertible Notes, after deducting fees and expenses of $6.7 million. We used $14.1 million of the net proceeds from the sale of the 2019Convertible Notes to pay the cost of the convertible bond hedges, as described below (after such cost was partially offset by the proceeds to us from the saleof warrants in the warrant transactions described below). In May 2017 and September 2017, we entered into privately negotiated transactions with certaininvestors to repurchase approximately $158.9 million and $19.6 million, respectively, aggregate principal amount of the 2019 Convertible Notes for anaggregate repurchase price of approximately $171.3 million and $21.4 million, respectively, including accrued interest. Pursuant to ASC Topic 470, Debt(“ASC 470”), the accounting for the May 2017 repurchase of the 2019 Convertible Notes was evaluated on a creditor-by-creditor basis with regard to the2022 Convertible Notes to determine modification versus extinguishment accounting. We concluded that the May 2017 repurchase of the 2019 ConvertibleNotes should be accounted for as an extinguishment and we recorded a debt extinguishment gain of $0.2 million related to the difference between theconsideration paid, the fair value of the liability component and carrying values at the repurchase date. As a result of the September 2017 repurchase of the2019 Convertible Notes, we recorded a debt extinguishment loss of $0.3 million related to the difference between the consideration paid, the fair value of theliability component and carrying value at the repurchase date.The 2019 Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the trustee.The 2019 Convertible Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on February 15 andAugust 15 of each year. The 2019 Convertible Notes will mature on February 15, 2019 unless earlier repurchased or converted. Upon conversion of theremaining 2019 Convertible Notes, such 2019 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combinationthereof, at a conversion rate of 36.9079 shares of common stock per $1,000 principal amount of the 2019 Convertible Notes, which corresponds to an initialconversion price of approximately $27.09 per share of our common stock.The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stockdividends and payment of cash dividends. On or after May 15, 2018 until the close of business on the second scheduled trading day immediately precedingthe maturity date, holders may convert all or any portion of their 2019 Convertible Notes, in multiples of $1,000 principal amount, at the option of theholder, regardless of the foregoing circumstances. The 2019 Convertible Notes were convertible as of December 31, 2018.We determined the expected life of the debt was equal to the five-year term of the 2019 Convertible Notes. The effective interest rate on the liabilitycomponent was 7.79% for the period from the date of issuance through December 31, 2018. As of December 31, 2018, the “if-converted value” did notexceed the remaining principal amount of the 2019 Convertible Notes.141Table of ContentsConvertible Notes Interest ExpenseThe following table sets forth total interest expense recognized related to the Convertible Notes during 2018, 2017, and 2016 (in thousands): Years Ended December 31,2018 2017 2016Contractual interest expense$10,935 $8,961 $5,000Amortization of debt issuance costs1,403 1,275 1,072Amortization of debt discount13,414 11,071 7,544Total interest expense$25,752 $21,307 $13,616Convertible Bond Hedge and Warrant TransactionsIn connection with the pricing of the 2019 Convertible Notes and in order to reduce the potential dilution to our common stock and/or offset cashpayments due upon conversion of the 2019 Convertible Notes, in February 2014 we entered into convertible bond hedge transactions and separate warranttransactions of our common stock underlying the aggregate principal amount of the 2019 Convertible Notes with certain financial institutions (the “callspread counterparties”). In connection with the May 2017 and September 2017 repurchases of the 2019 Convertible Notes, as discussed above, we enteredinto agreements with the call spread counterparties to terminate a portion of the then existing convertible bond hedge transactions in an amountcorresponding to the amount of such 2019 Convertible Notes repurchased and to terminate a portion of the then-existing warrant transactions.As of December 31, 2018, the remaining bond hedge transactions covered approximately 0.8 million shares of our common stock underlying theremaining $21.4 million principal amount of the 2019 Convertible Notes. The convertible bond hedges have an exercise price of approximately $27.09 pershare, subject to adjustment upon certain events, and are exercisable when and if the 2019 Convertible Notes are converted. If upon conversion of the 2019Convertible Notes, the price of our common stock is above the exercise price of the convertible bond hedges, the call spread counterparties will deliver sharesof our common stock and/or cash with an aggregate value approximately equal to the difference between the price of our common stock at the conversiondate and the exercise price, multiplied by the number of shares of our common stock related to the convertible bond hedges being exercised. The convertiblebond hedges were separate transactions entered into by us and were not part of the terms of the 2019 Convertible Notes or the warrants, discussed below.Holders of the 2019 Convertible Notes will not have any rights with respect to the convertible bond hedges.As of December 31, 2018, the remaining warrant transactions covered approximately 1.0 million shares of our common stock underlying the remaining$21.4 million principal amount of the 2019 Convertible Notes. The initial exercise price of the warrants is $34.12 per share, subject to adjustment uponcertain events, which was 70% above the last reported sale price of our common stock of $20.07 on February 11, 2014. The warrants would separately have adilutive effect to the extent that the market value per share of our common stock, as measured under the terms of the warrants, exceeds the applicable exerciseprice of the warrants. The warrants were issued to the call spread counterparties pursuant to the exemption from registration set forth in Section 4(a)(2) of theSecurities Act of 1933, as amended.As part of the May 2017 agreements to partially terminate the bond hedge and warrant transactions, we received approximately $0.3 million, which werecorded as a net increase to additional paid-in capital during 2017.2015 Term Loan FacilityIn August 2015, we entered into a credit agreement with a group of lenders, including Jefferies Finance LLC as administrative and collateral agent, thatprovided us with, among other things, a six-year $350.0 million term loan facility, under which we borrowed the full amount (the “2015 Term LoanFacility”).The 2015 Term Loan Facility included an annual mandatory prepayment of the debt in an amount equal to 50% of our excess cash flow (as defined inthe 2015 Term Loan Facility) as measured on an annual basis, beginning with the year ended December 31, 2016. We prepaid $3.0 million of the debt inApril 2017.In May 2017, we repaid the remaining $321.8 million of outstanding borrowings and accrued interest of the 2015 Term Loan Facility and, in accordancewith ASC 470, recognized a $9.7 million loss on debt extinguishment.142Table of ContentsFuture PaymentsFuture annual principal payments on our long-term debt as of December 31, 2018 were as follows (in thousands):PeriodFuture AnnualPrincipalPaymentsYear Ending December 31, 2019$21,417Year Ending December 31, 2020—Year Ending December 31, 2021—Year Ending December 31, 2022320,000Thereafter—Total$341,417143S.CONSOLIDATED QUARTERLY FINANCIAL DATA - UNAUDITEDThe following tables provide unaudited consolidated quarterly financial data for 2018 and 2017 (in thousands, except per share data): March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018Total revenues$117,387 $146,254 $122,238 $88,122Gross profit53,475 69,478 75,749 59,406Operating expenses (2)104,239 27,591 95,084 78,241Net loss from continuing operations$(58,098) $(25,817) $(64,678) $(20,746)Net income (loss) from discontinued operations$3,856 $5,736 $95,517 $(1,531)Net (loss) income$(54,242) $(20,081) $30,839 $(22,277) Basic net (loss) income per share: Loss from continuing operations$(1.70) $(0.75) $(1.88) $(0.60)Income (loss) from discontinued operations0.11 0.17 2.77 (0.04)Total$(1.59) $(0.58) $0.89 $(0.64) Diluted net (loss) income per share: Loss from continuing operations$(1.70) $(0.75) $(1.88) $(0.60)Income (loss) from discontinued operations0.11 0.17 2.77 (0.04)Total$(1.59) $(0.58) $0.89 $(0.64) March 31, 2017 June 30, 2017 September 30, 2017 December 31, 2017Total revenues$112,541 $130,371 $124,331 $128,525Gross profit (loss) (1)84,968 98,270 (226,000) 57,938Operating expenses (3)125,112 95,003 28,236 70,663Net (loss) income from continuing operations$(35,925) $(14,252) $(155,713) $738Net (loss) income from discontinued operations$(635) $186 $3,652 $2,722Net (loss) income$(36,560) $(14,066) $(152,061) $3,460 Basic net (loss) income per share: (Loss) income from continuing operations$(1.04) $(0.41) $(4.41) $0.02(Loss) income from discontinued operations(0.02) 0.01 0.10 0.08Total$(1.06) $(0.40) $(4.31) $0.10 Diluted net (loss) income per share: (Loss) income from continuing operations$(1.04) $(0.41) $(4.41) $0.02(Loss) income from discontinued operations(0.02) 0.01 0.10 0.08Total$(1.06) $(0.40) $(4.31) $0.10The sum of quarterly (loss) income per share totals differ from annual (loss) income per share totals due to rounding.(1) Gross profit (loss) for the third quarter of 2017 included an impairment charge of $319.2 million relating to the Makena base technology intangible asset.(2) Operating expenses for the second quarter of 2018 include the reversal of $49.8 million relating to the fair value of a contingent consideration liability that was no longerexpected to be paid.(3) Operating expenses for the first quarter of 2017 include $60.0 million of acquired IPR&D expense related to the one-time upfront payment under the terms of the PalatinLicense Agreement. Operating expenses for the third quarter of 2017 include the reversal of $49.9 million relating to the fair value of a contingent consideration liabilitythat was no longer expected to be paid.144T.VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS) Balance at Beginningof Period Additions (2) Deductions Chargedto Reserves Balance at End ofPeriodYear ended December 31, 2018: Accounts receivable allowances(1)$12,060 $229,509 $(232,026) $9,543Rebates, fees and returns reserves(2)$100,702 $270,959 $(294,891) $76,770Valuation allowance for deferred tax assets (3)$4,740 $108,562 $(24) $113,278Year ended December 31, 2017: Accounts receivable allowances(1)$9,533 $168,945 $(166,418) $12,060Rebates, fees and returns reserves(2)$89,466 $255,471 $(244,235) $100,702Valuation allowance for deferred tax assets (3)$1,429 $3,875 $(564) $4,740Year ended December 31, 2016: Accounts receivable allowances(1)$10,783 $122,792 $(124,042) $9,533Rebates, fees and returns reserves(2)$45,162 $186,941 $(142,637) $89,466Valuation allowance for deferred tax assets (3)$11,859 $632 $(11,062) $1,429________________________(1) Accounts receivable allowances represent discounts and other chargebacks related to the provision of our product sales.(2) Additions to rebates, fees and returns reserves are recorded as a reduction of revenues.(3) As of December 31, 2018, we have established a valuation allowance on our net deferred tax assets other than refundable AMT credits. At December 31, 2017, ourvaluation allowance related primarily to certain of our state NOL and credit carryforwards. At December 31, 2016, our valuation allowance related primarily to our federalcapital loss carryforward and our state NOL and credit carryforwards acquired from Lumara Health.U. RECENTLY ISSUED AND PROPOSED ACCOUNTING PRONOUNCEMENTSFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodiesthat are adopted by us as of the specified effective date.In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement(“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure frameworkproject. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and earlyadoption is permitted. We are currently evaluating the impact of our adoption of ASU 2018-13 on our consolidated financial statements.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments (“ASU 2016-13”). This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based onhistorical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 is effective for fiscal years beginning after December 15,2019, including interim periods within those fiscal years and early adoption is permitted. We are currently evaluating the impact of our adoptionof ASU 2016-13 in our consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This statement requires entities to recognize on its balance sheet assets andliabilities associated with the rights and obligations created by leases with terms greater than twelve months. This update is effective for annual reportingperiods beginning after December 15, 2018, which for us is the period beginning January 1, 2019. During the fourth quarter of 2018, we finalized ourassessments over the impact that these new standards will have on our consolidated results of operations, financial position and disclosures and are finalizingour accounting policies. As of December 31, 2018, we have not identified any accounting changes that would impact our results of operations or cash flows.However, we expect to recognize material right-of-use assets and lease liabilities related to our operating lease commitments. We currently plan to adopt thisstandard using the “modified retrospective approach” and follow the related transition option that allows for application of the transition provisions of thestandard at the beginning of the period of adoption. In addition, we currently plan to utilize the package of available transition practical expedients. Thereare also certain considerations related to internal control over financial reporting that are associated with implementing Topic 842. We145Table of Contentsare evaluating our internal control framework over leases to identify any changes that may need to be made in response to the new guidance. In addition,financial statement disclosures under the new guidance in Topic 842 will be expanded in comparison to the disclosure requirements under the currentguidance. We will have completed the design and implementation of the appropriate controls to obtain and disclose the information required under Topic842 in our first quarter of 2019.V. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTSIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which superseded all existing revenuerecognition requirements, including most industry specific guidance. The FASB subsequently issued a number of amendments to ASU 2014-09 that have thesame effective date and transition date (collectively, “ASC 606”). We adopted ASC 606 on January 1, 2018 using the modified retrospective transitionmethod. See Note D, “Revenue Recognition” for additional information.In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”).which requires amountsgenerally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-periodand end-of-period total amounts shown on the statement of cash flows. We adopted the standard on January 1, 2018 using the retrospective approach andmodified the presentation of our consolidated statements of cash flows in accordance with the standard. The adoption of ASU 2016-18 did not have amaterial impact on our consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments(“ASU 2016-15”).This standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debtextinguishment costs or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing,contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement ofcorporate owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. This newstandard also clarifies that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis of thenature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot beseparated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for theitem. We adopted the standard on January 1, 2018 using the retrospective approach. ASU 2016-15 did not have a material effect on our consolidatedfinancial statements upon adoption.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities (“ASU 2016-01”). This standard amends certain aspects of accounting and disclosure requirements of financial instruments,including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in ourresults of operations. This new standard does not apply to investments accounted for under the equity method of accounting or those that result inconsolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairmentadjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to bepresented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specificcredit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination withother deferred tax assets. We adopted the standard on January 1, 2018 using the modified retrospective approach. The adoption of ASU 2016-01 did not havean impact on our consolidated financial statements.W. SUBSEQUENT EVENTSAcquisition of Perosphere Pharmaceuticals Inc.On January 16, 2019, we acquired Perosphere through the merger of our wholly-owned subsidiary, Magellan Merger Sub, Inc., a Delaware corporation(“Merger Sub”), with and into Perosphere, with Perosphere continuing as the surviving entity and our wholly-owned subsidiary (the “Merger”). Theacquisition enhances our development pipeline by adding an innovative clinical asset to our portfolio and leveraging our expertise in hematology.As a result of the acquisition of Perosphere, we acquired the global rights to ciraparantag, an anticoagulant reversal agent, which is being investigated forpatients treated with novel oral anticoagulants or low molecular weight heparin when reversal of the anticoagulant effect of these products is needed foremergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. In addition, provided certain clinical milestones are met, the Phase3 program for ciraparantag will be partially funded under an existing clinical trial collaboration agreement, as amended, with a global pharmaceuticalcompany,146Table of Contentsunder which we may receive certain payments anticipated in 2019 and 2020 related to ciraparantag for use as an anticoagulant reversal agent to reverse theeffects of Savaysa®(edoxaban) and low molecular weight heparin.The Merger was completed pursuant to the Agreement and Plan of Merger (the “Perosphere Agreement”), dated as of December 12, 2018, by and among,inter alia, AMAG and Perosphere. Pursuant to the Perosphere Agreement, we paid, at closing, an upfront purchase price (the “Upfront Merger Consideration”)of approximately $50.0 million, approximately $40.0 million of which was funded from our available cash and approximately $10.0 million of which wasdeemed paid in connection with the cancellation of a convertible note in the principal amount of $10.0 million issued to us by Perosphere in October 2018.The purchase price is subject to customary post-closing adjustments under the Perosphere Agreement. In addition to the Upfront Merger Consideration,AMAG used available cash to repay $12.0 million of Perosphere’s term loan indebtedness and assumed approximately $6.2 million of Perosphere’s otherliabilities.Under and subject to the terms and conditions set forth in the Perosphere Agreement, we are obligated to pay future contingent consideration of up to anaggregate of $365.0 million (the “Milestone Payments”), including (a) up to an aggregate of $140.0 million that becomes payable conditioned upon theachievement of specified regulatory milestones for ciraparantag (the “Regulatory Milestone Payments”), including a $40.0 million milestone paymentconditioned upon approval by the European Medicines Agency and (b) up to an aggregate of $225.0 million that becomes payable conditioned upon theachievement of specified sales milestones (the “Sales Milestone Payments”). If the final label approved for ciraparantag in the U.S. includes a boxed warning,the Regulatory Milestone Payments shall no longer be payable, and any previously paid Regulatory Milestone Payments shall be credited against 50% ofany future Milestone Payment that otherwise becomes payable. The first Sales Milestone Payment of $20.0 million will be payable conditioned upon annualnet sales of ciraparantag of at least $100.0 million.We are unable to provide preliminary estimates of asset and liability values as the valuation of the assets acquired and liabilities assumed is in progress.2019 RestructuringIn February 2019, we completed a restructuring to combine our women’s health and maternal health sales forces into one integrated sales team, whichwill promote both Intrarosa and Makena. Approximately 110 employees were displaced through this workforce reduction. We expect to record a one-timerestructuring charge of approximately $6.0 million primarily related to severance and related benefits in the first quarter of 2019 and expect the activities tobe completed by the end of the first quarter of 2019.ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:None.ITEM 9A. CONTROLS AND PROCEDURES:Managements’ Evaluation of our Disclosure Controls and ProceduresOur principal executive officer and principal financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as definedin the Exchange Act Rule 13a-15(e), or Rule 15d-15(e)), with the participation of our management, have each concluded that, as of December 31, 2018, theend of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were designed and were effective to providereasonable assurance that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended,is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that suchinformation is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate toallow timely decisions regarding required disclosure. It should be noted that any system of controls is designed to provide reasonable, but not absolute,assurances that the system will achieve its stated goals under all reasonably foreseeable circumstances.Management’s Annual Report on Internal Control Over Financial ReportingManagement’s Report on Internal Control over Financial Reporting is contained in Part II, Item 8 “Financial Statements and Supplementary Data” of thisAnnual Report on Form 10-K for the year ended December 31, 2018 and is incorporated herein by reference.147Table of ContentsChanges in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) thatoccurred during the three months ended December 31, 2018 that have materially affected, or that are reasonably likely to materially affect, our internalcontrol over financial reporting. ITEM 9B. OTHER INFORMATION:None.148Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE:The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the Securities and Exchange Commission (the “SEC”) not later than 120 days after the close of our year ended December 31, 2018.ITEM 11. EXECUTIVE COMPENSATION:The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2018.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS:The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2018.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE:The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2018.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES:The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2018.149Table of ContentsPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:(a) The following documents are filed as part of this Annual Report on Form 10-K:(1)Financial Statements:The financial statements are filed as part of this Annual Report on Form 10-K under “Item 8. Financial Statements and Supplementary Data.”(2)Financial Statement Schedules:The financial statement schedules are omitted as they are either not applicable or the information required is presented in the financial statementsand notes thereto under “Item 8. Financial Statements and Supplementary Data.”(3)Exhibits:See Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K.ITEM 16. FORM 10-K SUMMARY:None.150Table of ContentsEXHIBIT INDEX ExhibitNumber Description2.1 Agreement and Plan of Merger, dated as of September 28, 2014, by and among Lumara Health Inc., AMAG Pharmaceuticals, Inc.,Snowbird, Inc., and Lunar Representative, LLC as the Stockholders’ Representative (incorporated herein by reference toExhibit 2.1 to the Company’s Current Report on Form 8-K filed September 29, 2014, File No. 001-10865)3.1, 4.1 Restated Certificate of Incorporation of AMAG Pharmaceuticals, Inc. (incorporated herein by reference to Exhibits 3.1 and 4.1tothe Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 001-10865)3.2,4.2 Certificate of Amendment of Restated Certificate of Incorporation of AMAG Pharmaceuticals, Inc. as filed on May 21, 2015 withthe Delaware Secretary of State (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-Kfiled May 28, 2015, File No. 001-10865)3.3, 4.3 Amended and Restated By-Laws of AMAG Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 3.1 to theCompany’s Current Report on Form 8-K filed December 17, 2015, File No. 001-10865)4.5 Specimen certificate representing AMAG Pharmaceuticals, Inc.’s Common Stock (incorporated herein by reference to Exhibit 4.3to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 001-14732)4.6 Base Indenture, dated as of February 14, 2014, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust, NationalAssociation (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 14,2014, File No. 001-10865)4.7 First Supplemental Indenture, dated as of February 14, 2014, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust,National Association (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865)4.80 Form of 2.50% Convertible Senior Note due 2019 (incorporated herein by reference to Exhibit 4.3 to the Company’s CurrentReport on Form 8-K filed February 14, 2014, File No. 001-10865)4.9 Indenture, dated as of August 17, 2015, by and among AMAG Pharmaceuticals, Inc., the Guarantors party thereto and WilmingtonTrust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form8-K filed August 17, 2015, File No. 001-10865)4.1 Form of 7.875% Senior Note due 2023 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form8-K filed August 17, 2015, File No. 001-10865)4.11 Indenture, dated as of May 10, 2017, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust, National Association(incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 15, 2017, File No. 001-10865)4.12 First Supplemental Indenture, dated as of May 10, 2017, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust,National Association (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed May15, 2017, File No. 001-10865)4.13 Form of 3.25% Convertible Senior Note due 2022 (incorporated herein by reference to Exhibit 4.3 to the Company’s CurrentReport on Form 8-K filed May 15, 2017, File No. 001-1086510.1* Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2009, File No. 001-14732)10.2* AMAG Pharmaceuticals, Inc.’s Amended and Restated Non-Employee Director Compensation Policy (incorporated herein byreference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, File No. 001-10865)10.3* AMAG Pharmaceuticals, Inc.’s Fourth Amended and Restated 2007 Equity Incentive Plan (incorporated herein by reference toAppendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed April 20, 2017, File No. 001-10865)10.4* AMAG Pharmaceuticals, Inc. 2015 Employee Stock Purchase Plan (incorporated herein by reference to Appendix C tothe Company’s Definitive Proxy Statement on Schedule 14A filed April 16, 2015, File No. 001-10865)10.5* AMAG Pharmaceuticals, Inc. First Amendment to 2015 Employee Stock Purchase Plan (incorporated herein by reference toAppendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed April 25, 2018, File No. 001-10865)10.6* Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.6to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, File No. 001-10865)151Table of Contents10.7* Form of Incentive Stock Option Agreement for AMAG Pharmaceuticals, Inc. Employees under AMAG Pharmaceuticals, Inc.’sFourth Amended and Restated 2007 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the yearended December 31, 2017, File No. 001-10865) 10.8* Form of Non-Qualified Stock Option Agreement for AMAG Pharmaceuticals, Inc. Employees under AMAG Pharmaceuticals, Inc.’sFourth Amended and Restated 2017 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the yearended December 31, 2017, File No. 001-10865) 10.9* Form of Restricted Stock Unit Agreement for AMAG Pharmaceuticals, Inc. Employees under AMAG Pharmaceuticals, Inc.’s FourthAmended and Restated 2007 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2018, File No. 001-10865)10.10* Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under AMAG Pharmaceuticals, Inc.’s FourthAmended and Restated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Company’s AnnualReport on Form 10-K for the year ended December 31, 2017, File No. 001-10865)10.11* Form of Restricted Stock Unit Agreement for Non-Employee Directors under AMAG Pharmaceuticals, Inc.’s Fourth Amended andRestated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2018, File No. 001-10865)10.12* Form of Non-Plan Stock Option Agreement, by and between AMAG Pharmaceuticals, Inc. and William K. Heiden (incorporatedherein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 10, 2012, File No. 001-10865)10.13* Form of Non-Qualified Stock Option Agreement - Non-Plan Inducement Grant (incorporated herein by reference to Exhibit 10.12to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 001-10865) 10.14* Form of Restricted Stock Unit Agreement - Non-Plan Inducement Grant (incorporated herein by reference to Exhibit 10.6 to theCompany’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, File No. 001-10865)10.15*+ AMAG Pharmaceuticals, Inc. Long-Term Incentive Plan (included as Exhibit A to the Form of Award Notice under the AMAGPharmaceuticals, Inc. Long-term Incentive Plan filed as Exhibit 10.16 to this Quarterly Report on Form 10-Q)10.16*+ Form of Award Notice under the AMAG Pharmaceuticals, Inc. Long-term Incentive Plan10.17* Form of Employment Agreement between AMAG Pharmaceuticals, Inc. and each of its executive officers (other than William K.Heiden) (incorporated herein by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015, File No. 001-10865)10.18* Amended and Restated Employment Agreement dated as of February 7, 2014 between AMAG Pharmaceuticals, Inc. andWilliam K. Heiden (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for thequarter ended March 31, 2014, File No. 001-10865)10.19* Amendment to Amended and Restated Employment Agreement, dated as of November 29, 2017, between AMAG Pharmaceuticals,Inc. and William K. Heiden (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filedNovember 30, 2017, File No. 001-10865)10.20 Lease Agreement, dated as of June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAY COLONY LLC(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 13, 2013, File No. 001-10865)10.21 First Amendment to Lease Agreement, dated June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAY COLONYLLC, dated March 24, 2015 (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2015, File No. 001-10865)10.22 Second Amendment to Lease Agreement, dated June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAYCOLONY LLC, dated December 4, 2015 (incorporated herein by reference to Exhibit 10.30 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2015, File No. 001-10865)10.23 Third Amendment to Lease Agreement, dated June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAY COLONYLLC, dated December 7, 2015 (incorporated herein by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2015, File No. 001-10865)152Table of Contents10.24 Fourth Amendment to Lease Agreement, dated as of June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAYCOLONY, LLC, dated January 1, 2018 (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2018, File No. 001-10865)10.25 License Agreement between AMAG Pharmaceuticals, Inc. and Abeona Therapeutics, Inc. (formerly known as PlasmaTechBiopharmaceuticals, Inc. and Access Pharmaceuticals, Inc.) dated as of June 6, 2013 (incorporated herein by reference toExhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865)(confidential treatment previously granted) 10.26 Commercial Supply Agreement, dated effective as of August 29, 2012, by and between AMAG Pharmaceuticals, Inc. and Sigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterended September 30, 2012, File No. 001-10865) (confidential treatment previously granted)10.27 Amendment No.1 to Commercial Supply Agreement, dated October 3, 2013, by and between AMAG Pharmaceuticals, Inc. andSigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K for the yearended December 31, 2013, File No. 001-10865) (confidential treatment previously granted)10.28 Amendment No. 2 to Commercial Supply Agreement, dated April 28, 2015, by and between AMAG Pharmaceuticals, Inc. andSigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2015, File No. 001-10865) (confidential treatment previously granted)10.29 Amendment No. 3 to Commercial Supply Agreement, dated October 19, 2015, by and between the Company and Sigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015, File No. 001-10865) (confidential treatment previously granted)10.30 Pharmaceutical Manufacturing and Supply Agreement, dated effective as of January 8, 2010, by and between AMAGPharmaceuticals, Inc. and Patheon Manufacturing Services LLC (as assignee from DSM Pharmaceuticals, Inc.) (incorporated hereinby reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, FileNo. 001-10865) (confidential treatment previously granted)10.31 Amendment No. 1 to Pharmaceutical Manufacturing and Supply Agreement, dated July 5, 2014, by and between AMAGPharmaceuticals, Inc. and Patheon Manufacturing Services LLC (as assignee from DSM Pharmaceuticals, Inc.) (incorporated hereinby reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, FileNo. 001-10865)10.32 Amendment No. 2 to Pharmaceutical Manufacturing and Supply Agreement, dated June 19, 2015, by and between AMAGPharmaceuticals, Inc. and Patheon Manufacturing Services LLC (as assignee from DPI Newco LLC as assignee from DSMPharmaceuticals, Inc.) (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2015, File No. 001-10865) (confidential treatment previously granted)10.33 Amended and Restated Technical Transfer and Supply Agreement, dated as of December 19, 2016, by and between AMAGPharmaceuticals, Inc. and the Pfizer CentreOne Group of Pfizer, Inc. (incorporated herein by reference to Exhibit 10.34 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2016) (confidential treatment previously granted)10.34 Development and License Agreement, dated September 30, 2014, by and between Lumara Health Inc and Antares Pharma, Inc.(incorporated herein by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015, File No. 001-10865) (confidential treatment previously granted)10.35 First Amendment to Development and License Agreement, dated March 20, 2018, by and between AMAG Pharma USA, Inc. (f/k/aLumara Health, Inc.), AMAG Pharmaceuticals, Inc. and Antares Pharma, Inc.(incorporated herein by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, File No. 001-10865) (confidential treatmentpreviously granted)10.36 Manufacturing Agreement, dated March 20, 2018, by and between AMAG Pharmaceuticals, Inc. and Antares Pharma, Inc.(incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2018, File No. 001-10865) (confidential treatment previously granted)10.37 License Agreement, dated January 8, 2017, by and between AMAG Pharmaceuticals, Inc. and Palatin Technologies, Inc.,(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 3, 2017, FileNo. 001-10865) (confidential treatment previously granted)10.38 License Agreement, dated as of February 13, 2017, by and between AMAG Pharmaceuticals, Inc. and Endoceutics Inc.(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 5, 2017, File No. 001-10865) (confidential treatment previously granted)153Table of Contents10.39 Manufacturing and Supply Agreement, dated as of April 5, 2017, by and between AMAG Pharmaceuticals, Inc. and EndoceuticsInc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 5, 2017, File No.001-10865) (confidential treatment previously granted)10.40 Distribution and Supply Agreement, dated December 20, 2017, by and between AMAG Pharmaceuticals, Inc. and Prasco, LLC(Confidential treatment previously granted) (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form10-Q/A filed December 21, 2018)10.41 Commercial Supply Agreement, dated June 4, 2018, by and between AMAG Pharmaceuticals, Inc. and SAFC, Inc. (Confidentialtreatment previously granted) (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 10-Q/A filedDecember 21, 2018)10.42 Stock Purchase Agreement, dated June 14, 2018, by and among AMAG Pharmaceuticals, Inc., CBR Acquisition Holdings Corp.and GI Chill Acquisition LLC (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filedJune 15, 2018 File No. 001-10865)10.43+ Contract Manufacturing Agreement, dated September 1, 2018, by and between AMAG Pharmaceuticals, Inc. and Fresenius KabiAustria GmbH (Certain confidential information contained in this exhibit was omitted by means of redacting a portion of the textand replacing it with [***]. This exhibit has been filed separately with the SEC without any redactions pursuant to a ConfidentialTreatment Request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended)10.44 Agreement and Plan of Merger, dated as of December 12, 2018, by and among AMAG Pharmaceuticals, Inc., Magellan MergerSub, Inc., Perosphere Pharmaceuticals Inc. and Bryan E. Laulicht, as Perosphere equityholder representative (incorporated byreference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed December 13, 2018).21.1+ Subsidiaries of AMAG Pharmaceuticals, Inc.23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm24.1 Power of Attorney (included on the signature page(s) hereto)31.1+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS+ XBRL Instance Document101.SCH+ XBRL Taxonomy Extension Schema Document101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document101.LAB+ XBRL Taxonomy Extension Label Linkbase Document101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document+ Exhibits marked with a plus sign (“+”) are filed herewith.++ Exhibits marked with a double plus sign (“++”) are furnished herewith.* Exhibits marked with a single asterisk reference management contracts, compensatory plans or arrangements, filed in response toItem 15(a)(3) of the instructions to Form 10‑K. The other exhibits listed and not marked with a “+” or “++” have previously been filed with the SEC and are incorporated hereinby reference, as indicated.154Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. AMAG PHARMACEUTICALS, INC. By:/s/ William K. Heiden William K. HeidenPresident and Chief Executive Officer Date:March 1, 2019We, the undersigned officers and directors of AMAG Pharmaceuticals, Inc., hereby severally constitute and appoint William K. Heiden and EdwardMyles, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacitiesindicated below, all amendments to this report, and generally to do all things in our names and on our behalf in such capacities to enable AMAGPharmaceuticals, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and ExchangeCommission.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Name Title Date /s/ William K. Heiden President and Chief Executive Officer (Principal ExecutiveOfficer) and Director March 1, 2019William K. Heiden /s/ Edward Myles Executive Vice President of Finance, Chief Financial Officerand Treasurer (Principal Financial and Accounting Officer) March 1, 2019Edward Myles /s/ Barbara Deptula Director March 1, 2019Barbara Deptula /s/ John Fallon, M.D. Director March 1, 2019John Fallon, M.D. /s/ Robert J. Perez Director March 1, 2019Robert J. Perez /s/ Lesley Russell, MB. Ch.B., MRCP Director March 1, 2019Lesley Russell, MB. Ch.B., MRCP /s/ Gino Santini Director March 1, 2019Gino Santini /s/ Davey S. Scoon Director March 1, 2019Davey S. Scoon /s/ James Sulat Director March 1, 2019James Sulat 155 Exhibit 10.16AWARD NOTICE UNDER THE AMAG PHARMACEUTICALS, INC. LONG-TERM INCENTIVE PLANName of Participant: No. of Restricted Stock Units: (the “Target Award”)Grant Date of Target Award: Performance Measurement Period: Pursuant to the AMAG Pharmaceuticals, Inc. Long-Term Incentive Plan (the “LTI Plan”) under the Company’s FourthAmended and Restated 2007 Equity Incentive Plan (the “2007 Plan”), AMAG Pharmaceuticals, Inc. (the “Company”) has selected theParticipant named above to be awarded the Target Award specified above, subject to the terms and conditions of the LTI Plan, the2007 Plan and this Award Notice. Capitalized terms used but not defined in this Award Notice shall have the meaning given suchterms in the LTI Plan. A copy of the LTI Plan is attached hereto as Exhibit A.1.Acceptance of Award. The total number of Restricted Stock Units that may be earned by the Participant (if any) shallbe determined by the Company’s performance for the Performance Measurement Period specified above, as set forth in Section 4(b) ofthe LTI Plan. The actual number of Restricted Stock Units that may be earned could be up to 150% of such Target Award and couldalso be lower than the Target Award and could be zero.2.Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwiseencumbered or disposed of by the Participant, and any shares of Stock issuable with respect to the Award may not be sold, transferred,pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in the LTI Planand this Agreement and (ii) shares of Stock have been issued to the Participant in accordance with the terms of the LTI Plan and thisAgreement.3.Termination of Business Relationship.(a)If, at any time prior to the conclusion of the Performance Measurement Period, the Participant’s BusinessRelationship terminates for any reason, the Participant shall automatically forfeit the right to receive any portion of the Award.(b)“Business Relationship” means service to the Company or any of its Subsidiaries, or its or their successors, in thecapacity of an employee, officer, director, consultant or advisor. For purposes hereof, a Business Relationship shall not be consideredas having terminated during any military leave, sick leave, or other leave of absence if approved in writing by the Company and if suchwritten approval, or applicable law, contractually obligates the Company to continue1the Business Relationship of the Participant after the approved period of absence (an “Approved Leave of Absence”). For purposeshereof, a Business Relationship shall include a consulting arrangement between the Participant and the Company that immediatelyfollows termination of employment, but only if so stated in a written consulting agreement executed by the Company.4.Sale Event. Upon a Sale Event, the Award shall be treated as specified in Section 4(c) of the LTI Plan.5.Issuance of Shares.(a)Each Restricted Stock Unit relates to one share of the Company’s Stock. Shares of Stock (if any) shall be issued anddelivered to the Participant in accordance with the terms of this Award Notice and of the LTI Plan upon compliance to the satisfactionof the Administrator with all requirements under applicable laws or regulations in connection with such issuance and with therequirements hereof and of the LTI Plan. The determination of the Administrator as to such compliance shall be final and binding onthe Participant.(b)Subject to Section 3, as soon as practicable following the conclusion of the Performance Measurement Period (the“Vesting Date”) and the determination of the number of Restricted Stock Units earned in accordance with Section 4 of the LTI Plan(but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the vested RestrictedStock Units, if any, will be settled in an equal number of shares of Stock (the “Issuance Date”).(c)Until such time as shares of Stock are issued to the Participant pursuant to the terms hereof and of the LTI Plan, theParticipant shall have no rights as a stockholder with respect to any shares of Stock underlying the Restricted Stock Units, includingbut not limited to any voting rights.6.Incorporation of Plans. Notwithstanding anything herein to the contrary, this Award Notice shall be subject to andgoverned by all the terms and conditions of the LTI Plan, including the powers of the Administrator set forth in Section 3 of the LTIPlan, as well as all the terms and conditions of the Company’s 2007 Plan.7.Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of theParticipant for income tax purposes, the Participant will pay to the Company or, if appropriate, any of its Subsidiaries, or makearrangements satisfactory to the Administrator regarding the payment of, any United States federal, state or local or foreign taxes of anykind required by law to be withheld with respect to such amount. The Company shall satisfy the minimum required tax withholdingobligation by withholding from shares of Stock to be issued to the Participant a number of shares of Stock with an aggregate FairMarket Value that would satisfy the minimum withholding amount due.8.Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to thesettlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described inSection 409A of the Code.29.No Obligation to Continue Business Relationship. Neither the Company nor any Subsidiary is obligated by or as aresult of the Plan or this Agreement to continue the Participant’s Business Relationship, and neither the Plan nor this Agreement shallinterfere in any way with the right of the Company or any Subsidiary to terminate the Business Relationship of the Participant at anytime.10.Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award andsupersedes all prior agreements and discussions between the parties concerning such subject matter.11.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure futureequity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may processany and all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Participant (i) authorizes the Company to collect,process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Participant mayhave with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information inelectronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companiesconsider appropriate. The Participant shall have access to, and the right to change, the Relevant Information. Relevant Information willonly be used in accordance with applicable law.12.Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to theattention of the Company’s Treasurer and shall be mailed or delivered to the Participant at the address on file with the Company or, ineither case, at such other address as one party may subsequently furnish to the other party in writing.3SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Award is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the 2007 Plan, and a copy of the 2007 Plan’s relatedprospectus. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Participant (including through anonline acceptance process) is acceptable. Dated: Participant's Signature Participant's name and address: 4Exhibit AAMAG PHARMACEUTICALS, INC. LONG-TERM INCENTIVE PLAN1.PurposeThis Long-Term Incentive Plan (the “Plan”) is intended to provide an incentive for superior work and to motivate executivesand senior management of AMAG Pharmaceuticals, Inc. (the “Company”) toward even higher achievement and business results, to tietheir goals and interests to those of the Company and its stockholders and to enable the Company to attract and retain highly qualifiedexecutives and employees. The Plan is for the benefit of Participants (as defined below). Awards made under this Plan constituteRestricted Stock Units under Section 11 of the Company’s Third Amended and Restated 2007 Equity Incentive Plan (as may beamended from time to time, the “2007 Plan”) and shall be granted under, and subject to, the terms of the 2007 Plan.2.DefinitionsFor purposes of this Plan:(a)“Administrator” means the Compensation Committee of the Board.(b)“Award” means a grant to a Participant hereunder.(c)“Award Notice” means a notice or agreement provided to a Participant that sets forth the terms, conditions andlimitations of the Participant’s participation in this Plan, including, without limitation, the Participant’s Target Award.(d)“Board” means the Board of Directors of the Company.(e)“Closing Stock Price” means the Stock Price as of the last day of any Performance Measurement Period.(f)“Code” means Internal Revenue Code of 1986, as amended.(g)“Dividend Value” shall mean the aggregate amount of dividends and other distributions paid on one share of Stock forwhich the record date occurred on or after the first day of the Performance Measurement Period and prior to theIssuance Date for the Performance Measurement Period (excluding dividends and distributions paid in the form ofadditional shares).(h)“Effective Date” means February 23, 2017.(i)“Employment Agreement” means any applicable agreement between a Participant and the Company governingemployment matters.5(j)“Fair Market Value” means, as of any given date, the fair market value of a security which shall be the closing saleprice reported for such security on the principal stock exchange or, if applicable, any other national exchange on whichthe security is traded or admitted to trading on such date on which a sale was reported. If there are no market quotationsfor such date, the determination shall be made by reference to the last date preceding such date for which there aremarket quotations.(k)“Grant Date” means the date that the Administrator designates in its approval of an Award in accordance withapplicable law as the date on which the Award is granted.(l)“Index Companies” means the companies included in the NASDAQ Biotechnology Index, but specifically excludingthe Company, as of the first day of the applicable Performance Period.(m)“Index Relative TSR Return” means the Company’s Total Shareholder Return during the Performance MeasurementPeriod compared to the Total Shareholder Return of the Index Companies during the Performance MeasurementPeriod. Relative performance will be determined by numerical ranking the Company and the Index Companiesaccording to their respective Total Shareholder Return, with a rank of #1 for the company with the highest TotalShareholder Return through the bottom ranking equal to the total number of companies in the comparison. After thisranking, the percentile ranking of the Company relative to the Index Companies will be determined as follows: (R-1)P=1-Nwhere:“P” represents the percentile ranking which will be rounded, if necessary, to the nearest whole percentile byapplication of regular rounding.“N” represents the number of Companies in the Index, including the Company.“R” represents the Company’s numerical ranking among the Index Companies.For purposes of clarity, if there were 150 Companies in the Index, including the Company, and the Company’s TotalShareholder Return ranked #14, the percentile ranking would be the 91st percentile (1-(14-1/150).6(n)“Initial Stock Price” means the Stock Price as of the first day of any Performance Measurement Period.(o)“Participant” means an executive or senior management of the Company selected by the Administrator to participate inthe Plan.(p)“Performance Measurement Period” means, unless otherwise specified by the Administrator at the time an Award isgranted, the period commencing on the Grant Date and ending on the earlier of (i) the date immediately preceding thethird anniversary thereafter or (ii) the date upon which a Sale Event (as defined in the 2007 Plan) shall occur (the earlierof such dates, the “Valuation Date”). There shall be overlapping Performance Measurement Periods.(q)“Restricted Stock Units” means the restricted stock units of the Company.(r)“Stock” means the Company’s common stock.(s)“Stock Price” for each of the Company and the Index Companies means, as of a particular date, the VWAP (volumeweighted average price), as determined by Bloomberg, of the common stock of such company for the 20 trading daysending on, and including, such date; provided however, that in the event of a Sale Event, the Company’s Stock Priceshall equal the Fair Market Value, as determined by the Administrator in its discretion, of the total consideration paid orpayable in the transaction resulting in the Sale Event, for one share of Stock.(t)“Target Award” means the target number of Restricted Stock Units that comprise a Participant’s Award for eachPerformance Measurement Period, as set forth in the Participant’s Award Notice.(u)“Total Shareholder Return” means for each of the Company and the Index Companies, with respect to the PerformanceMeasurement Period, the total return (expressed as a percentage) that would have been realized by a shareholder who(a) bought one share of common stock of such company at the Initial Stock Price on the first day of the PerformanceMeasurement Period, (b) reinvested each dividend and other distribution declared during the Performance MeasurementPeriod with respect to such share (and any other shares, or fractions thereof, previously received upon reinvestment ofdividends or other distributions or on account of stock dividends), without deduction for any taxes with respect to suchdividends or other distributions or any charges in connection with such reinvestment, in additional shares of commonstock of such company at a price per share equal to (i) the Fair Market Value on the trading day immediately precedingthe ex-dividend date for such dividend or other distribution less (ii) the amount of such dividend or other distribution,and (c) sold such shares on the Valuation Date at the Fair Market Value of such shares on the Valuation Date, withoutdeduction for any taxes with respect to any gain on such sale or any charges in connection with such sale. As set forthin, and pursuant to, Section73(b) of this Plan, appropriate adjustments to the Total Shareholder Return shall be made to take into account all stockdividends, stock splits, reverse stock splits and the other events set forth in Section 3(b) for each of the Company andthe Index Companies that occur during the Performance Measurement Period.3. Administration(a) The Plan shall be administered by the Administrator. The Administrator shall have the discretionary authority to make alldeterminations (including, without limitation, the interpretation and construction of the Plan and the determination of relevant facts)regarding the entitlement to any Award hereunder and the amount of any Award to be paid under the Plan (including the number ofshares of Stock issuable to any Participant), provided such determinations are made in good faith and are consistent with the purposeand intent of the Plan. In particular, but without limitation and subject to the foregoing, the Administrator shall have the authority:(i) to select Participants under the Plan;(ii) to determine the Target Award and any formula or criteria for the determination of the Target Award for eachParticipant;(iii) to determine the terms and conditions, not inconsistent with the terms of this Plan, which shall govern AwardNotices and all other written instruments evidencing an Award hereunder, including the waiver or modification of any suchconditions;(iv) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall fromtime to time deem advisable; and(v) to interpret the terms and provisions of the Plan and any Award granted under the Plan (and any Award Notices orother agreements relating thereto) and to otherwise supervise the administration of the Plan.(b) Notwithstanding anything herein to the contrary and without duplication of Section 3(c) of the 2007 Plan, theAdministrator may, in its discretion, make appropriate adjustments to any Award, any Target Award, any Initial Stock Price, anyClosing Stock Price or the Total Shareholder Return for any period in connection with or as a result of any of the following eventswhich occur or have occurred after the Effective Date: reorganization, recapitalization, reclassification, stock dividend, stock split,reverse stock split or other similar change in the Company’s capital stock, if the outstanding shares of Stock are increased or decreasedor are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or differentshares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or othersecurities.(c) Subject to the terms hereof, all decisions made by the Administrator pursuant to the Plan shall be final, conclusive andbinding on all persons, including the Company and the Participants. No member of the Board or the Administrator, nor any officer oremployee of the8Company acting on behalf of the Board or the Administrator shall be personally liable for any action, determination or interpretationtaken or made in good faith with respect to the Plan, and all members of the Board or Administrator and each and any officer oremployee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by theCompany in respect of any such action, determination or interpretation.4. Determination and Payment of Awards(a) Each Participant’s Award Notice shall specify such Participant’s Target Award for each Performance MeasurementPeriod. The Target Award shall be expressed as a number of Restricted Stock Units.(b) The Administrator shall determine during the first 60 days following the end of the Performance Measurement Period thenumber of Restricted Stock Units that shall vest on account of the Company’s Index Relative TSR Return in accordance with thefollowing table:Index Relative TSR ReturnPercentage of Target Award VestedBelow 25th PercentileBelow Threshold (0%)25th PercentileThreshold (50%)50th PercentileTarget (100%)75th Percentile or higherMaximum (150%)In the event that the Index Relative TSR Return shall fall between the threshold and target or between the target and the maximum,linear interpolation shall be used to determine such number of vested Restricted Stock Units. For purposes of clarity, (i) in no eventshall the percentage of the Target Award that vests exceed 150%; and (ii) in the event the Index Relative TSR Return does not equal orexceed the 25th percentile, no portion of the Target Award shall vest. Notwithstanding anything herein to the contrary, if the TotalShareholder Return in a Performance Measurement Period is a negative percentage, then in no event shall the percentage of the TargetAward that vests exceed 100%, even if the Total Shareholder Return would result in a greater percentage pursuant to the table above.(c) In the event that a Sale Event occurs prior to the end of a Performance Measurement Period, a Participant will be deemedto have earned the number of Restricted Stock Units equal to the higher of (i) the Target Award, multiplied by a fraction, the numeratorof which shall be the number of calendar days from the first day of the applicable Performance Measurement Period to the ValuationDate and the denominator of which shall be the number of days in the Performance Measurement Period or (ii) the number ofRestricted Stock Units based on the attainment level resulting from the Index Relative TSR Return, calculated from the first day of theapplicable Performance Measurement Period through the end of the calendar month immediately preceding the date of the Sale Eventpursuant to Section 4(b) above. The foregoing treatment supersedes the treatment of performance awards upon a Sale Event in theGrantee’s Employment Agreement and under the 2007 Plan.9(d) Vesting and Settlement. Subject to Section 5, and except as otherwise set forth in an Award Notice, as soon as practicable(but in no event later than 74 days) following the conclusion of the applicable Performance Measurement Period, the vested RestrictedStock Units, if any, will be settled in an equal number of shares of Stock (the “Issuance Date”). On the Issuance Date, the Companyshall also issue to each Participant a number of shares of Stock determined by multiplying the Dividend Value for the PerformanceMeasurement Period by the number of shares of Stock issued to such Participant pursuant to the first sentence of this Section 4(d) anddividing the product by the Fair Market Value of one share of Stock on the trading day immediately preceding the Issuance Date.5. Termination of Employment. Unless otherwise provided in any Award Notice, and notwithstanding anything set forth in anEmployment Agreement to the contrary, if at any time prior to the conclusion of any Performance Measurement Period, a Participant’semployment with the Company terminates for any reason, such Participant shall automatically forfeit the right to receive any Awardnot vested as of the date of termination of employment.6. Miscellaneous(a) Amendment and Termination. The Company reserves the right to amend or terminate the Plan at any time in its discretionwithout the consent of any Participants, but no such amendment shall adversely affect the rights of the Participants with regard tooutstanding Awards. In the event the Plan is terminated, the Company shall determine the Awards payable to Participants based on theIndex Relative TSR for each Performance Measurement Period ending on the date of Plan termination. The Awards for eachPerformance Measurement Period shall be further prorated to reflect the shortened Performance Measurement Period.(b) No Contract for Continuing Services. This Plan shall not be construed as creating any contract for continued servicesbetween the Company or any of its subsidiaries and any Participant and nothing herein contained shall give any Participant the right tobe retained as an employee or consultant of the Company or any of its subsidiaries.(c) No Transfers. A Participant’s rights in an interest under the Plan may not be assigned or transferred.(d) Unfunded Plan. The Plan shall be unfunded and shall not create (or be construed to create) a trust or separate fund.Likewise, the Plan shall not establish any fiduciary relationship between the Company or any of subsidiaries or affiliates and anyParticipant. To the extent that any Participant holds any rights by virtue of an Award under the Plan, such right shall be no greater thanthe right of an unsecured general creditor of the Company or any of its subsidiaries.(e) Governing Law. The Plan and each Award Notice awarded under the Plan shall be construed in accordance with andgoverned the laws of the State of Delaware, without regard to principles of conflict of laws of such state.10(f) Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of aParticipant for income tax purposes, a Participant will pay to the Company or, if appropriate, any of its Subsidiaries, or makearrangements satisfactory to the Administrator regarding the payment of, any United States federal, state or local or foreign taxes of anykind required by law to be withheld with respect to such amount.(g) Construction. Wherever appropriate, the use of the masculine gender shall be extended to include the feminine and/orneuter or vice versa; and the singular form of words shall be extended to include the plural; and the plural shall be restricted to meanthe singular.(h) Headings. The Section headings and Section numbers are included solely for ease of reference. If there is any conflictbetween such headings or numbers and the text of this Plan, the text shall control.(i) Effect on Other Plans. Nothing in this Plan shall be construed to limit the rights of Participants under the Company’s or itssubsidiaries’ benefit plans, programs or policies.(j) Effective Date. The Plan shall be effective as of the Effective Date.11[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDExhibit 10.43CONTRACT MANUFACTURING AGREEMENTThis Contract Manufacturing Agreement is made by and between (1) Fresenius Kabi Austria GmbH, having its registered office atHafnerstrasse 36, A-8055 Graz, Austria (“FRESENIUS”) and (2) AMAG Pharmaceuticals, Inc., a Delaware corporation having anoffice at 1100 Winter Street, Waltham, MA 02451, U.S.A. (“COMPANY”), effective as of September 1, 2018 (the “Effective Date”).Recitals(A)WHEREAS, COMPANY holds or is seeking the marketing authorisation of the Product (as defined herein).(B)WHEREAS, COMPANY desires to engage FRESENIUS for the manufacture and supply of the Product which is intendedfor commercial use.(C)WHEREAS, FRESENIUS desires to manufacture such Product and supply it to COMPANY.(D)WHEREAS, the Parties have agreed to enter into this Agreement to set forth the terms and conditions on which themanufacture and supply of any particular Product under a Product Schedule (as defined herein) will be carried out.NOW, THEREFORE, the Parties hereto agree as follows:1.Definitions1.1“Affiliate” shall mean any company, corporation, partnership, joint venture and/or firm which, directly or indirectly, controlsor is controlled by or is under common control with a Party. As used in the definition of “Affiliate”, “control” means (a) in thecase of corporate entities, direct or indirect ownership of more than fifty percent (50%) of the stock or shares having theright to vote for the election of directors (or such lesser percentage that is the maximum allowed to be owned by a foreigncorporation in a particular jurisdiction), and (b) in the case of non-corporate entities, the direct or indirect power to manage,direct or cause the direction of the management and policies of the non-corporate entity or the power to elect more than fiftypercent (50%) of the members of the governing body of such non-corporate entity.1.2“Agreement” means this Contract Manufacturing Agreement, together with all Appendices attached hereto, as amendedfrom time to time by the Parties in accordance with Section 26.1, and all fully signed Product Schedules.1.3[***].1.4"Applicable Laws" means the applicable laws, statutes, rules, codes, regulations, orders, judgments and/or ordinances ofany Authority related to granting approvals for, or the performance of Services under this Agreement, and/or registration,approval, and/or use of Product in Austria, the European Union, and the United States, as may be in effect from time to timeor as any of the same may be amended from time to time, including GMP.1[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED1.5“Authority” means any government regulatory authority responsible for granting approvals for the performance of Servicesunder this Agreement or for issuing regulations pertaining to the Manufacture and/or use of Product in the intended countryof use, including the FDA.1.6“Average Yield” has the meaning set forth in Part C.7 of the applicable Product Schedule.1.7"Background Intellectual Property" means any and all Intellectual Property of a Party, which, as demonstrated byadmissible evidence, (i) already existed as of the Effective Date of this Agreement or (ii) was developed or obtained by oron behalf of such Party independent of this Agreement, and without reliance upon the Confidential Information of the otherParty.1.8“Batch” means a specific quantity of Product that is produced during one instance of Manufacture in accordance with theinstructions in the applicable MBR, and which Batch of Product is intended to satisfy Specifications.1.9“Batch Documentation” has the meaning set forth in Section 16.2.1.10“Business Day” means a day other than Saturday or Sunday or a day that is not a public holiday in the jurisdiction in whichCOMPANY and/or FRESENIUS are located or a day that is not in the shutdown times at FRESENIUS which COMPANYhas been notified of at least [***] in advance of such shutdown.1.11“Certificate of Analysis” means a document signed by an authorized representative of FRESENIUS, describingSpecifications for the Product, and the results of testing of the Batch.1.12“Certificate of Conformity” means a document signed by an authorized representative of FRESENIUS, certifying that aparticular Batch was Manufactured in accordance with GMP, this Agreement, and all other requirements of the applicableQuality Agreement.1.13“Change Of Control” means any transaction or series of related transactions involving: (i) the sale, lease, or transfer of allor substantially all of the assets of the COMPANY to any third party; (ii) any merger or consolidation of the COMPANY intoor with another person or entity that is a third party (other than a merger or consolidation effected exclusively to change theCOMPANY’s domicile or solely for internal restructuring purposes), or any other corporate reorganization, in each casefollowing which the COMPANY is not the surviving or successor entity and the stockholders of the COMPANY in theircapacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of thesurviving or successor entity’s outstanding voting power; or (iii) any sale or other transfer by the stockholders of theCOMPANY of shares representing at least a majority of the COMPANY’s then-total outstanding combined voting power. Asused in this definition of “Change Of Control”, “third party” means an entity other than an Affiliate of COMPANY.1.14“Change Order” has the meaning in Section 8.1.15“Confidential Information” means any and all non-public information (a) furnished or disclosed by or on behalf of one Party(“Disclosing Party”) to the other Party (“Receiving Party”) or (b) developed by a Party via the use of ConfidentialInformation under this Agreement or generated in the performance of this Agreement, in either case whether marked“confidential” or not, whether in oral, visual, electronic, written or any other form2[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDincluding, but not limited to, financial data, trade secrets, know-how, forecasts, marketing plans, strategies, inventions,ideas, formulas, processes, test data, procedures, formulations and specifications, and all of those portions of notes,compilations, summaries, memoranda or other documents prepared by the Receiving Party which contain, reflect or areotherwise derived from the before mentioned information as well as any copies thereof and of the before mentionedinformation.1.16“Effective Date” has the meaning set forth above.1.17“Facility” means the facility(ies) of FRESENIUS identified in the applicable Product Schedule and any additional facilities tobe used for Manufacture of Product as identified in the applicable Quality Agreement.1.18"FDA" means the United States Food and Drug Administration and any successor agency thereto.1.19[***].1.20“Fixed Price Term” means the term for which the Price specified in the relevant Product Schedule will remain fixed, asspecified in Part C.3 of the relevant Product Schedule.1.21“Force Majeure” has the meaning in Section 25.1.22“Forecast” has the meaning set forth in Section 5.1.1.23"GMP" means current good manufacturing practices, rules, regulations and guidelines specified in applicable EuropeanUnion and Pharmaceutical Inspection Convention and Co-Operating Scheme (PIC/S) directives (and the correspondingnational laws and regulations), in the United States Code of Federal Regulations, and in any other applicable laws, rules andregulations and guidelines.1.24"Intellectual Property" means all know-how, copyrights, trademarks, patents, trade secrets, designs, information,documentation, drawings, methods, techniques, data, regulatory submissions, specifications, and other intellectual propertyof any kind (whether or not protected under patent, trademark, copyright or similar jaws).1.25“Invoice Currency” means the currency in which each Product will be invoiced and paid, as specified in Part C.2 of therelevant Product Schedule.1.26“Loss(es)” shall mean any and all liabilities, costs, damages and expenses, including [***].1.27“Manufacturing Activities”, “Manufacture”, “Manufactured”, or “Manufacturing” means any steps, processes andactivities necessary for production by FRESENIUS of Product including the manufacturing, processing, packaging,labelling, quality control testing, stability testing, release, storage or supply of Product as required by the applicable ProductSchedule, this Agreement, the MBR, and the applicable Quality Agreement.1.28“Manufacturing Process” means any and all procedures and activities (or any step in any procedure or activity) (a)planned to be used by FRESENIUS to Manufacture Product, as3[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDevidenced in the MBR or (b) actually used by FRESENIUS, as evidenced in the Batch Documentation the particular Batch.1.29“MBR” means the version-controlled complete detailed instructions agreed to in writing by the Parties for the ManufacturingProcess to be used to Manufacture a Batch of the applicable Product, which may be modified or changed only inaccordance with the applicable Quality Agreement.1.30“Minimum Order Quantities” means the minimum quantity of primary packaging materials that a Designated Supplier (asdefined in Section 14.1) will sell per order.1.31“Parties” means FRESENIUS and COMPANY. “Party” shall mean either FRESENIUS or COMPANY as the contextindicates.1.32“Price” means, with respect to the Product, the amount payable for such Product as specified in Part C.1 of the relevantProduct Schedule, subject to adjustment as set forth in such Product Schedule.1.33“Product(s)” means, with respect to a Product Schedule, the final form of the product including if applicable SuppliedMaterials, to be supplied pursuant to and as detailed in Part A of such Product Schedule.1.34“Product Schedule” means a schedule for supply of Product that is executed and delivered by the Parties in accordancewith Section 4.1.35“Product Schedule Effective Date” means, with respect to each Product Schedule, the date on which such ProductSchedule becomes effective, as set forth in such Product Schedule.1.36“Purchase Order” means a binding order issued by COMPANY pursuant to this Agreement substantially in the formidentified in Exhibit 2 for such quantities of a Product as COMPANY desires to purchase from FRESENIUS in accordancewith the terms of this Agreement stating, amongst others, purchase order number, COMPANY product code, COMPANYproduct name, quantities, Prices, desired delivery date and address.1.37“Quality Agreement” means a quality agreement(s) entered into by the Parties, as it may be amended from time to time bythe Parties in accordance with its terms, containing quality assurance responsibilities for Product.1.38“Records” have the meaning set forth in Section 9.1.1.39“Services” means the services to be performed by FRESENIUS under this Agreement.1.40“Specification(s)” means (a) with respect to each Product Schedule, the specifications for such Product, as specified inPart A of such Product Schedule and/or the applicable Quality Agreement as the same may be updated from time to time inaccordance with this Agreement and the respective Quality Agreement.1.41“Supplied Materials” has the meaning set forth in Section 15.1.4[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED1.42“Territory” means all countries or regions in which a commercial sale of the applicable Product is intended to take place aslisted in Part A.3 of the relevant Product Schedule.2.General.2.1Performance of Services. FRESENIUS will perform Services in accordance with this Agreement, the applicable QualityAgreement, the applicable Product Schedule and all Applicable Laws, including GMP. FRESENIUS will perform all Servicesat the Facility, provide all staff and equipment necessary to perform the Services in accordance with this Agreement, andhold at such Facility all equipment, Supplied Materials and other items used in the Services. FRESENIUS will supply, inaccordance with the relevant approved raw material specifications as identified in the applicable Quality Agreement, allmaterials to be used by FRESENIUS in the performance of Services other than the Supplied Materials.2.2Facility Requirements. FRESENIUS will not change the location of such Facility or use any additional facility for theperformance of Services under this Agreement without prior written notice to, and prior written consent from, COMPANY.FRESENIUS will maintain, at its own expense, the Facility and all equipment required for the Manufacture of Product in astate of repair and operating efficiency consistent with the requirements of GMP and all Applicable Laws, and FRESENIUSStandard Operating Procedures (“SOPs”). FRESENIUS will notify COMPANY of any proposed changes to the Facility, itsutilities, layout or other matters that may impact the Product in accordance with the requirements of the applicable QualityAgreement.2.3Validation. FRESENIUS will be responsible for performing all validation of the Facility, equipment and cleaning andmaintenance processes employed in the Manufacturing Process as set forth in the Quality Agreement and if not identifiedtherein in accordance with GMP, FRESENIUS’ SOPs, and Applicable Laws.2.4Changes to Laws. If there are any material changes in GMP or Applicable Laws enacted after the execution of a ProductSchedule that impact the Manufacture of such Product, and such changes are specific to the Product and not of generalrequirement for contract manufacturing services and [***], then FRESENIUS will promptly provide written notice toCOMPANY documenting such change and [***], and the Parties shall in good faith discuss and negotiate ways to continuethe Manufacture of Product overcoming [***] and the possibility of a Change Order. In the event the Parties are unable toreach a mutually agreeable arrangement within [***], FRESENIUS may terminate this Agreement by providing COMPANYwith written notice of its intent to terminate, with a notice period of [***], beginning with the date such notice is delivered toCOMPANY.2.5Subcontracting. FRESENIUS may not subcontract with any third party or any Affiliate of FRESENIUS, to perform any of itsobligations under this Agreement without the prior written consent of COMPANY. Such consent shall be deemed given forsuch third party performing certain Services if such subcontractor is specified in the applicable Quality Agreement asproviding such Services. FRESENIUS will be solely responsible for the performance of any permitted subcontractor, andliability arising out of such performance as if such performance had been provided by FRESENIUS itself under thisAgreement. FRESENIUS will cause any such permitted subcontractor to be bound by, and to comply with, the terms of this5[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDAgreement, as applicable, including all confidentiality, quality assurance, regulatory and other obligations and requirementsof, FRESENIUS set forth in this Agreement.2.6Duty to Notify. FRESENIUS will promptly notify COMPANY if, at any time during the term of this Agreement, FRESENIUShas reason to believe that it will be unable to perform or complete the Services in a timely manner. Compliance byFRESENIUS with this Section will not relieve FRESENIUS of any other obligation or liability under this Agreement.2.7Ownership of Materials. COMPANY will at all times retain title to and ownership of the Supplied Materials, Product, anyintermediates and components of Supplied Materials or Product, and any work in process at each and every stage of theManufacturing Process, with the exception of packaging material and other materials which are procured by FRESENIUS.Title to and ownership of the FRESENIUS procured materials will be transferred to COMPANY upon delivery of Product toCOMPANY. FRESENIUS will provide within the Facility an area or areas where such materials and any work in processare segregated and stored in accordance with the Specifications and GMP, and in such a way as to be able at all times toclearly distinguish such materials from products and materials belonging to FRESENIUS, or held by it for any other party’saccount. FRESENIUS will ensure that Supplied Materials, Product, any intermediates and components of any SuppliedMaterials or Product, and any work in process are free and clear of any liens or encumbrances. FRESENIUS will protectsuch materials from loss, damage and theft at all stages of the Manufacturing Process, and immediately notifiesCOMPANY if at any time it believes any such materials have been damaged, lost or stolen.3.Engagement of FRESENIUS.3.1Manufacture of Product. FRESENIUS will Manufacture and sell Product to COMPANY in accordance with the terms of thisAgreement and upon terms consistent with any confirmed Purchase Order pursuant to Section 6.2.4.Product Schedules.4.1The Parties shall enter into a Product Schedule (substantially in the form of Exhibit 1) for each Product that is or may be thesubject of a marketing authorization of an Authority that is to be manufactured and supplied subject to the terms andconditions of this Agreement.4.2Any number of Product Schedules may be executed pursuant to this Agreement. Each Product Schedule will govern thesupply of the Product set forth therein.4.3Each Product Schedule will operate for the term specified in that Product Schedule unless earlier terminated in accordancewith Section 23 of this Agreement.5.Forecasting; Minimum purchase quantity; Delivery.5.1For every Product Schedule, [***] when such Product Schedule remains in effect, COMPANY shall submit to FRESENIUSa rolling forecast covering each product code set forth in such Product Schedule for COMPANY’s good faith estimate of thequantity of the relevant Product it expects to order from FRESENIUS pursuant to such Product Schedule for the time periodof the following [***], broken down on a [***] basis, (each such estimate, a “Forecast”). The first [***] of each Forecast shallbe binding to COMPANY (the “Binding6[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDForecast”). The Binding Forecasts can only be changed with FRESENIUS written consent. The following [***] after theBinding Forecast period shall be semi-binding on COMPANY, meaning COMPANY may order [***] of the forecastedquantity of Product in such portion of the Forecast (the “Semi-Binding Forecast”) without FRESENIUS’ prior writtenconsent. The subsequent [***] of each Forecast are estimations and shall be used by FRESENIUS for planning purposesonly.5.2In addition, COMPANY shall submit to FRESENIUS [***] for every Product Schedule in effect a non-binding to [***]Forecast for planning purposes only.5.3Primary packaging materials (as described in the applicable Quality Agreement) used to manufacture the Products can bepurchased by FRESENIUS based on [***] rolling forecast figures pursuant to Section 5.1. [***] shall bear all costs of suchmaterials if they expire, including reasonable scrapping costs of the materials if primary packaging materials in stock expireduring the term of this Agreement due to [***]. For the avoidance of doubt, any Minimum Order Quantities shall be specifiedin the applicable Product Schedule. FRESENIUS is responsible for maintaining a sufficient inventory of materials in order tomeet its obligations under this Agreement, including the Forecasts, and such materials will be used in a first-expiry, first out(FEFO) basis.5.4Concerning Product under the Semi-Binding Forecast and Binding Forecasts: if the quantity of Product ordered byCOMPANY pursuant to Purchase Orders submitted to FRESENIUS is (a) less than the quantity forecasted in the BindingForecast for such period, or (b) less than [***] of the quantity forecasted in the Semi-Binding Forecast for such period, thenCOMPANY shall pay FRESENIUS the compensation specified in Part C.6 of the relevant Product Schedule for suchshortfall. For avoidance of doubt, if (x) as set forth in Section 5.1, FRESENIUS provides its written consent to a change inthe Binding Forecast, or (y) FRESENIUS is unable to supply the quantity of Product under any Purchase Order that isconsistent with the Binding Forecast, FRESENIUS shall not be entitled to such compensation, unless agreed to byCOMPANY in a signed writing.5.5Subject to Section 2.6, based on the analysis of Forecasts it receives from COMPANY, FRESENIUS undertakes to informCOMPANY within [***] of receipt of the Forecast of any significant unavailability of capacity it might face in fulfillingCOMPANY’s needs.5.6COMPANY guarantees to purchase and pay a minimum purchase quantity of Product as stated in the relevant ProductSchedule under Part B.5. If COMPANY does not purchase the minimum purchase quantity, FRESENIUS is entitled tocompensation as defined in Part B.5 to the relevant Product Schedule.5.7The delivery terms for Product are specified in Part B.1 of the relevant Product Schedule.5.8The packaging and labelling requirements are specified in Part B.3 of the relevant Product Schedule.5.9Notwithstanding any terms and conditions in a Product Schedule or this Agreement that obligate COMPANY to purchase aminimum quantity of Product, and pay compensation to FRESENIUS for a failure to purchase such quantities, suchpurchase obligations and compensation that would otherwise be due from COMPANY will be reduced [***] for Product7[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDquantities affected by the events set forth in Sections 5.9(a)-(e) below, if COMPANY cannot fulfil its minimum purchasequantity obligations [***] due to:(a)[***];(b)[***];(c)[***];(d)[***];(e)[***].6.Orders.6.1COMPANY shall submit to FRESENIUS Purchase Orders for its planned requirements of Product under each ProductSchedule not less than [***] prior to the required delivery date of the Product. Each Purchase Order shall detailCOMPANY’s purchase order number, FRESENIUS’ product codes, and FRESENIUS product names for the Product, asspecified in the applicable Product Schedule, as well as the delivery date and required quantities per delivery date. EachPurchase Order shall also include the shipping and invoice address of COMPANY.6.2All Purchase Orders shall be in writing and be transmitted by facsimile or by email. Each Purchase Order submitted toFRESENIUS by COMPANY that conforms to the requirements of this Agreement, the applicable Product Schedule, andthe applicable Forecast shall be confirmed [***] in writing by FRESENIUS at the latest [***] after receipt of each suchPurchase Order; provided, that, (i) Purchase Orders are for Product within the Binding Forecast and (ii) FRESENIUS [***]shall act in good faith and use [***] to accept and fulfil any other Purchase Order that is consistent with the Forecast exceptif FRESENIUS has notified COMPANY of (a) its inability to supply the quantity of Product under Purchase Ordersconsistent with the Binding Forecast in accordance with Section 5.5 or 25, or (b) an uncured material breach byCOMPANY. Each Purchase Order issued by COMPANY pursuant to this Agreement will be subject to the terms of thisAgreement and will be incorporated herein and form part of this Agreement.6.3Confirmed Purchase Orders can only be changed by a mutual written agreement of both Parties. Unless otherwise agreedby the Parties, each Purchase Order shall specify one delivery date for all Batches ordered thereunder. Notwithstanding theforegoing, delivered quantities of Product [***] consistent with the Average Yield set forth in Part C.7 of the applicableProduct Schedule. In this event, [***] only the quantities of Product delivered by FRESENIUS to COMPANY are payable byCOMPANY.6.4Product ordered pursuant to confirmed Purchase Orders will be delivered [***] unless otherwise mutually agreed by theParties in writing, Product shall be delivered at the latest within [***] of the delivery date specified by COMPANY in anyPurchase Order that is consistent with the Forecast and Section 6.1.8[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED7.Quality.7.1The Product shall satisfy the Specifications. The Parties shall comply with the provisions and requirements of the relevantQuality Agreement.7.2Each Party shall maintain governmental permits, licenses and approvals enabling such Party to perform its obligationsunder this Agreement.7.3FRESENIUS shall maintain, at its own expense, governmental permits and licenses for the Facility enabling it to perform itsobligations under this Agreement. At COMPANY’s request, FRESENIUS will provide COMPANY with copies of all suchpermits and licenses, COMPANY will have the right to use any and all information contained in such governmental permitsand licenses, in connection with regulatory approval of Product.7.4Further quality relevant issues and the allocation of the responsibilities are listed in the applicable Quality Agreement. TheParties shall comply with the provisions of the applicable Quality Agreement. If there are any direct conflicts between theterms of the applicable Quality Agreement and this Agreement, the provisions in this Agreement shall govern, except that ifthere is a conflict between this Agreement and the applicable Quality Agreement related to quality matters, the QualityAgreement will prevail.8Unless and until otherwise agreed by the Parties by entering into a new or additional Quality Agreement or otherwiseamending the Quality Agreement, the Quality Agreement for Product that is supplied under a Product Schedule will apply toall Products delivered by FRESENIUS to COMPANY under all Product Schedules. If changes to the Specifications or theQuality Agreement are necessary and such changes would materially increase or reduce the costs for FRESENIUS, asdocumented and reasonably demonstrated to COMPANY, the Parties shall negotiate in good faith a Change Order tomodify the Price of the effected Product as well as the fees payable. Changes, Manufacturing Process and Specifications.8.1Changes. If a required modification to this Agreement, or a Product Schedule, or the Quality Agreement is identified by aParty including as a result of a change in GMP as described in Section 2.4, the identifying Party will notify the other Party inwriting as soon as reasonably possible, and FRESENIUS will provide COMPANY with a change order (“Change Order”)containing a description of the required modifications and their effect on the scope, fees, costs and timelines of thisAgreement, or Product Schedule or Quality Agreement, as applicable, and will use reasonable efforts to do so within [***] ofreceiving or providing such notice, as the case may be. No Change Order will be effective unless and until it has beensigned by authorized representatives of both Parties.8.2Process/Specifications Changes. No change or modification to the Manufacturing Process or Specifications for anyProduct will be made by FRESENIUS unless approved in advance in writing signed by COMPANY and made inaccordance with the change control provisions of the applicable Quality Agreement.9.Record and Sample Retention.9.1Records. FRESENIUS will keep complete and accurate records of Batch Documentation of Product and/or otherdocuments related to the Manufacturing Process of Product as9[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDrequired by Applicable Laws, the applicable Quality Agreement, and this Agreement (collectively, the “Records”). AllRecords will be the property of COMPANY and, except as required by Applicable Laws or to meet its obligations under thisAgreement, will not be transferred, delivered or otherwise provided to any party other than COMPANY, without the priorwritten approval of COMPANY. FRESENIUS will retain Records in accordance with the FRESENIUS SOPs for recordsretention, the Quality Agreement, and Applicable Laws. COMPANY may require FRESENIUS to provide such Recordsafter the retention period ends. In such case, COMPANY shall inform FRESENIUS in writing at least [***] prior to end of therespective retention period. FRESENIUS shall make the Records available to COMPANY for inspection or copying uponCOMPANY’s reasonable request or during audits by COMPANY. For the avoidance of doubt, nothing in this Section 9.1 isintended to alter or affect the parties’ respective rights pursuant to Section 20.2(b) below.9.2Samples.(a)Retained Samples. FRESENIUS will take and retain, for such period and in such quantities as required by GMP and theapplicable Quality Agreement, samples of Product Manufactured under this Agreement (“Retained Samples”).(b)Other Samples. From time to time, COMPANY may request from FRESENIUS, and FRESENIUS shall provide toCOMPANY or its designee, samples of Product (other than any Retained Samples that FRESENIUS is required toretain pursuant to GMP) in accordance with the applicable Quality Agreement, Section 16.4, or as otherwisereasonably required by COMPANY. Upon COMPANY’s written request, FRESENIUS will provide such samples toCOMPANY or its designee in accordance with the applicable Quality Agreement, or if such samples are for apurpose other than as contemplated under the applicable Quality Agreement (such samples, “Other Samples”),FRESENIUS shall provide such Other Samples to COMPANY or its designee in accordance with COMPANY’sreasonable written instructions according to Prices per unit defined in the relevant Product Schedule plus additionalout of pocket costs.10.Regulatory Matters.10.1Regulatory Inspections.(a)FRESENIUS will inform COMPANY of any unannounced Regulatory Authority inspections that involve the Productswithin [***]. FRESENIUS will inform COMPANY of any scheduled Authority inspections that involve the Products within[***] of the notification to FRESENIUS of such an inspection. FRESENIUS will permit a representative from COMPANYto be present at the Facility for a pre-approval inspection or any subsequent inspection that directly involves Product.COMPANY personnel will participate in the inspection related to COMPANY’s Products if it so chooses or at therequest of the regulatory agency.(b)FRESENIUS will inform COMPANY within [***] of any Authority critical or major findings (i.e. Form 483's, warningletters or such other similar correspondence) that have an impact on the manufacture of the Product. Copies ofAuthority audit findings and10[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDresponses will be provided to COMPANY; proprietary information may be redacted unless such information directlyrelates to COMPANY’s products.(c)COMPANY will maintain reports of any inspection carried out by regulatory authorities at COMPANY’s facilities that aredirectly related to the Product with details of any major, minor, or adverse comments. For inspections that arespecifically related to the manufacture of Product(s) at the Facility, COMPANY will notify FRESENIUS within [***] of theinitiation of such inspection and provide updates at regular intervals during such inspection. COMPANY shall make anyresponse to Authorities with respect to such inspections if needed within [***]. Copies of the regulatory agency findingsand the site responses specifically relating to the manufacture of Product at the Facility are to be sent to FRESENIUS,redacted if applicable, or confirm absence of observations and/or responses.10.2Inspections/Audits by COMPANY. FRESENIUS will permit COMPANY and/or its representatives to perform audits toinspect the Facility including the Records and the holding facilities for Supplied Materials in an interval, duration, and noticeperiod as defined in the applicable Quality Agreement to ensure compliance with the terms of this Agreement, and (b) forcause with the notice period defined in the applicable Quality Agreement, in each case [***], and as may be further definedin the applicable Quality Agreement. For all other audits by COMPANY or its representatives, such additional audit must beagreed to by the Parties including, [***].10.3Waste Disposal. The generation, collection, storage, handling, transportation, movement and release of hazardousmaterials and waste generated in connection with the Services will be the responsibility of FRESENIUS at FRESENIUS’sole cost and expense except for reasonable costs associated with such activities for hazardous materials that expire (a)due to changes in the [***] rolling Forecast provided by COMPANY provided such changes or hazardous materialexpiration are unrelated to FRESENIUS acts or omissions, or (b) due to COMPANY’s omissions. Without limiting otherapplicable requirements, FRESENIUS will prepare, execute and maintain, as the generator of waste, all licenses,registrations, approvals, authorizations, notices, shipping documents and waste manifests required under Applicable Laws.10.4Safety Procedures. FRESENIUS will be solely responsible for implementing and maintaining health and safety proceduresfor the performance of Services and for the handling of any materials or hazardous waste used in or generated by theServices. FRESENIUS, in consultation with COMPANY, will develop safety and handling procedures for Product; provided,however, that COMPANY will have no responsibility for FRESENIUS’ health and safety program.11.Price.11.1The Price of each Product is [***]. The Price is payable in the applicable Invoice Currency. Price for Product is indicated inthe respective Product Schedule. [***].11.2The Price for Product and the period for which it will be valid, and the conditions under which such Price will be reviewed,except as set forth below, are laid out in the relevant Product Schedule. [***].11[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED11.3[***].11.4[***]:a)[***].b)[***].c)[***].d)[***].IndexInternet link[***][***]11.5If COMPANY requests specific quality and regulatory activities [***] not defined in the applicable Quality Agreement or thatare specifically identified in the applicable Product Schedule as excluded from the Price for such Product, such activities,and the fees associated with such additional activities must be expressly authorized to be performed by COMPANY inwriting. [***].12.Invoicing and Payment.12.1All amounts due under this Agreement will be invoiced by FRESENIUS in accordance with this Agreement and theapplicable Product Schedule. FRESENIUS shall issue an invoice to COMPANY for the applicable Price for all Productsdelivered to COMPANY hereunder pursuant to a Product Schedule [***]. Each duly issued invoice shall contain a referenceto the Purchase Order number of COMPANY and shall state FRESENIUS’ registered VAT number.12.2COMPANY shall pay all invoices in full within [***] from the date of receipt of the relevant invoice to the payee set forth inthe applicable Product Schedule, unless such invoice is the subject of a good faith dispute in which case COMPANY willpromptly advise FRESENIUS of the dispute and the Parties will cooperate with each other to timely resolve such dispute.13.Shipping and Delivery.Delivery terms of Product are defined in the respective Product Schedule. FRESENIUS will not make Product available toCOMPANY’s carrier until FRESENIUS has received written instructions from COMPANY to do so. FRESENIUS willensure that each Batch will be delivered to COMPANY or COMPANY’s designee in accordance with the instructions forshipping and packaging specified by COMPANY in the applicable Product Schedule or otherwise agreed in writing.12[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED14.Designated Suppliers.14.1The Parties may agree that FRESENIUS will only order certain or all raw material or packaging, which are needed tomanufacture the Product, from certain suppliers pre-approved in writing by COMPANY (“Designated Suppliers”). If theParties agree on Designated Suppliers, these Designated Suppliers will be listed in the relevant Annex of the applicableQuality Agreement. For the avoidance of doubt, the term “Designated Suppliers” does not include suppliers of SuppliedMaterials (as defined in Section 15.1 below).14.2COMPANY is responsible for auditing and qualification of Designated Suppliers if expressly agreed to in writing byCOMPANY. If a Designated Supplier does not deliver in the quality or time demanded by FRESENIUS or if its deliveriessuffer shortfalls, damages or defects, COMPANY and FRESENIUS will negotiate further actions and shall [***] toovercome and resolve [***] such shortfalls, damages and defects. [***].15.Supplied Materials.15.1The Parties may agree that COMPANY supplies certain or all raw materials or packaging, which are needed tomanufacture the Product, to FRESENIUS (“Supplied Materials”). If the Parties agree on this, the Supplied Materials will belisted and specified in the relevant Annex of the applicable Quality Agreement and/or the applicable Product Schedule.15.2COMPANY will provide Supplied Materials (as specified in the applicable Product Schedule or as specified in the relevantAnnex of the applicable Quality Agreement), unless otherwise mutually agreed in writing by the Parties, [***], to theFRESENIUS manufacturing site for the Product, in such quantities and quality of the Supplied Materials as are required toenable FRESENIUS to manufacture and deliver the quantities and quality of Products ordered. FRESENIUS agrees (a) touse the Supplied Materials exclusively for the manufacturing of the Products under this Agreement, (b) to account for allSupplied Materials, (c) not to provide Supplied Materials to any third party without the express prior written consent ofCOMPANY, and (d) [***], to destroy or return to COMPANY all unused quantities of Supplied Materials according toCOMPANY’s written directions.15.3If any Supplied Materials negatively deviate from the quality agreed to in writing by the Parties in the applicable QualityAgreement for such Supplied Materials or if the deliveries of Supplied Materials suffer shortfalls, damages, delays ordefects not caused by FRESENIUS actions or inactions, FRESENIUS shall immediately notify COMPANY, andCOMPANY shall promptly supply FRESENIUS with conforming Supplied Materials. Should COMPANY not be able totimely meet the requirements for Supplied Materials through no fault of FRESENIUS and therefore the Manufacturing isstopped, delayed, frustrated or otherwise blocked, the Parties will discuss in good faith the impact and how to deal with thissituation and possible losses. [***].15.4Replacement: In the event of any loss or damage of any Supplied Materials delivered hereunder and needed forManufacture of a Batch of Product, COMPANY shall replace and provide FRESENIUS with Supplied Materials according tothe terms set forth in Section 15.2, [***]. The Supplied Material reimbursement costs will be as set forth in the applicableProduct Schedule.13[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED16.Testing and Acceptance of Product.16.1Testing by FRESENIUS. The Product will be Manufactured in accordance with the Manufacturing Process approved byCOMPANY, and with GMP. Each Batch of Product will be sampled and tested by FRESENIUS against the Specifications,and as set forth in the applicable Quality Agreement.16.2Provision of Records. If, based upon such tests and documentation review for the Batch, a Batch of Product conforms tothe Specifications and was Manufactured according to GMP and the Manufacturing Process, then a Certificate of Analysisand a Certificate of Conformity will be completed and approved by FRESENIUS and delivered to COMPANY, and suchCertificate of Analysis and Certificate of Conformity will include any other requirements set forth in the applicable QualityAgreement. This Certificate of Conformity, a Certificate of Analysis, raw data from quality control testing and analysis asdefined in the relevant Appendix of the Quality Agreement, and a complete and accurate copy of the Batch records and anyother documentation specified in the applicable Quality Agreement (collectively, the “Batch Documentation”) for eachBatch of Product will be promptly delivered to COMPANY as an electronic copy. [***].16.3Review of Batch Documentation; Acceptance. COMPANY will review the Batch Documentation for each Batch of Productafter delivery of the Batch Documentation and may test samples of the Batch of Product against the Specifications [***].COMPANY will notify FRESENIUS in writing of its acceptance or rejection of such Batch within [***] of date of receipt (asset forth in Section 16.2) of the electronic copy of the complete Batch Documentation relating to such Batch, subject toSection 16.6. During this review period, the Parties agree to respond promptly, to any reasonable inquiry or request for acorrection or change by the other Party with respect to such Batch Documentation. COMPANY has no obligation to accepta Batch if such Batch does not comply with the Specifications and/or was not Manufactured in compliance with GMP and/orthe Manufacturing Process specified in the MBR for the Batch; [***]. If such notice is not given by COMPANY in the timeperiod specified above, the Product is deemed to be delivered in the right quantities, in compliance with the Specifications,and Manufactured in accordance with GMP and the agreed Manufacturing Process subject to Section 16.6.16.4Disputes. In case of any disagreement as to whether Product conforms to the applicable Specifications or wasManufactured in compliance with GMP or the agreed Manufacturing Process, the quality assurance representatives of theparties will work in good faith, which shall include providing such documents and samples as may be reasonably requestedby the other Party, to resolve any such disagreement and COMPANY and FRESENIUS will follow their respective SOPs todetermine the conformity of the Product to the Specifications, and the Manufacturing Process and GMP. If the foregoingdiscussions do not resolve the disagreement in a reasonable time [***].16.5Product Non-Compliance and Remedies. If [***] a Batch of Product fails to conform to the Specifications subject to Section16.7 or was not Manufactured in compliance with GMP and the Manufacturing Process [***], then FRESENIUS will, atCOMPANY’s sole option, promptly:14[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED(a)Replace, as soon as reasonably possible, [***], the Product of a failed Batch by Manufacturing a compliant Batch ofProduct (i.e., the replacement Batch conforms to the Specifications and was Manufactured in accordance with GMPand the agreed to Manufacturing Process. [***];or(b)[***].16.6Latent Defects. Notwithstanding anything to the contrary in Section 16.3, the provisions of Section 16.5 and the disputemechanism in Section 16.4, will apply to any Batch of Product that is a non-conforming Batch as a result of a Latent Defect(defined below) if COMPANY advises FRESENIUS in writing of such Latent Defect within [***] of discovery of such LatentDefect. “Latent Defect” means [***].16.7Product Non-Compliance. Notwithstanding Section 16.5, if a Batch of Product fails to conform to the Specifications as aresult of COMPANY-provided Supplied Materials that were defective when delivered to FRESENIUS, [***].16.8Disposition of Non-Conforming Product. The ultimate disposition of non-conforming Product will be the responsibility of [***].17.Insurance. The Parties shall maintain throughout the term of this Agreement and for [***] after effective termination orexpiry of the Agreement a commercial liability insurance covering product liability and other consumer injuries arising fromthe sale of the Products in an amount of at least [***] per occurrence and [***] in the aggregate. At the request of a Party, theother Party shall provide documentation sufficient to show proof of such coverage.18.Indemnification; Limitation of Liability.18.1COMPANY shall defend, indemnify and hold harmless FRESENIUS and its Affiliates, and its and their respective officers,statutory representatives, directors, and employees, and agents (the “FRESENIUS Indemnitees”) from and against anyand all Losses incurred by the FRESENIUS Indemnitees for or in connection with any claims brought by third partiesagainst the FRESENIUS Indemnitees to the extent arising or related to (i) infringement of any third party rights byFRESENIUS from its use of COMPANY Background Intellectual Property [***], in accordance with the terms of thisAgreement as determined by a court of competent jurisdiction, (ii) failure of COMPANY to conform with the stipulationsunder this Agreement or the applicable Quality Agreement, (iii) [***], (iv) breach of this Agreement by COMPANY; or (v)negligence or wilful misconduct of COMPANY Indemnitees.18.2FRESENIUS shall defend, indemnify and hold harmless COMPANY and its Affiliates, and its and their respective officers,directors, and employees and agents (the “COMPANY Indemnitees”) from and against any and all Losses incurred by theCOMPANY Indemnitees for or in connection with any claims brought by third parties against the COMPANY Indemniteesto the extent arising or related to (i) infringement of any third party rights by COMPANY from its use of FRESENIUSBackground Intellectual Property in accordance with the terms of this Agreement, (ii) failure of FRESENIUS to conform withthe stipulations under this Agreement or the applicable Quality Agreement due to its negligence, (iii) breach15[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDof this Agreement by FRESENIUS; or (iv) negligence or wilful misconduct of FRESENIUS Indemnitees.18.3Each Party must notify the other Party within [***] of receipt of any claims made by a third party for which the other Partymight be liable under this Section 18. Subject to Section 18.4, the indemnifying Party will have the sole right to defend,negotiate, and settle such third-party claims. The indemnified Party will be entitled to participate in the defense of suchmatter and to employ counsel at its expense to assist in such defense; provided, however, that the indemnifying Party willhave final decision-making authority regarding all aspects of the defense of any claim. The Party seeking indemnificationwill provide the indemnifying Party with such information and assistance as the indemnifying Party may reasonably request,at the expense of the indemnifying Party.18.4Settlement. Neither Party will be responsible nor bound by any settlement of any claim nor by any suit made without its priorwritten consent; provided, however, that the indemnified Party will not unreasonably withhold or delay such consent.18.5Limitation of Liability. NEITHER PARTY WILL BE LIABLE UNDER ANY LEGAL THEORY (WHETHER TORT,CONTRACT OR OTHERWISE) FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVEDAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTSHEREUNDER, INCLUDING LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THISAGREEMENT, HOWEVER CAUSED, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCHDAMAGES, [***]. NOTHING IN THIS SECTION 18.5 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATIONRIGHTS OR OBLIGATIONS OF EITHER PARTY.18.6Liability Cap. EXCEPT FOR DAMAGES THAT ARE A RESULT OF [***], OR EITHER PARTY’S INDEMNIFICATIONOBLIGATIONS, OR OBLIGATIONS TO MAKE PAYMENT UNDER THIS AGREEMENT, AS FAR AS PERMITTED BYLAW, THE AGGREGATE OF FRESENIUS’ LIABILITY AND OBLIGATION TO COMPANY FOR THIS AGREEMENTSHALL BE LIMITED TO [***] (AS DEFINED IN THE APPLICABLE PRODUCT SCHEDULE) AND THE GREATER OF[***] BY COMPANY IN THE [***] PRIOR TO WHEN THE CLAIM AROSE PER [***].19.Product Recall; Adverse Events.19.1Recalls. As between COMPANY and FRESENIUS, COMPANY shall have sole discretion over whether and under whatcircumstances to require the recall of a Product. COMPANY will inform FRESENIUS promptly of any need or desire forrecall of Product and FRESENIUS shall cooperate with and give all reasonable and timely assistance to COMPANY inconnection therewith. [***].19.2Adverse Events. COMPANY will be solely responsible for adverse event reporting relating to Product (or any productcontaining or comprised of Product). In the event FRESENIUS receives or becomes aware of any adverse eventinformation which may be related to Product (or any product containing or comprised of Product), FRESENIUS willimmediately or as otherwise defined in the Quality Agreement provide COMPANY with all such information in English in theform and by the process required by COMPANY.16[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED20.Intellectual Property.20.1Background Intellectual Property; Licenses. This Agreement does not affect the ownership of a Party’s BackgroundIntellectual Property which remains the property of such Party (or its licensors). FRESENIUS does not acquire a license orany other right to COMPANY’s Background Intellectual Property except for the limited purpose of carrying out its duties andobligations under this Agreement and that such limited, non-exclusive, license will expire upon the completion of such dutiesand obligations or the termination or expiration of this Agreement, whichever is the first to occur. FRESENIUS herebygrants to COMPANY a non-exclusive, transferable (in conjunction with a permitted assignment under Section 26.7),sublicensable (to Affiliates of COMPANY), royalty-free, license to COMPANY and its Affiliates to use FRESENIUSBackground Intellectual Property only to the extent necessary to distribute, offer for sale, sell, import, export, and otherwisedispose of Product, limited to the longer of the time this Agreement is in force or all Product supplied under this Agreementis used.20.2Improvements.(a)“Improvements” means all discoveries, inventions, developments, modifications, innovations, updates, enhancements,improvements, writings or rights, and other Intellectual Property that are made, discovered, conceived, created,invented, developed, or reduced to practice in the performance of Services under this Agreement.(b)All Improvements that relate solely to [***] will be the sole and exclusive property of FRESENIUS (“FRESENIUSImprovements”). To the extent that FRESENIUS Improvements relay to the Product, FRESENIUS will grantCOMPANY and COMPANY hereby accepts a worldwide, perpetual, irrevocable, transferable, sub-licensableroyalty-free license to the extent necessary to freely operate regarding those FRESENIUS Improvements. All otherImprovements will be the sole and exclusive property of COMPANY (“COMPANY Improvements”). FRESENIUSwill have a limited license to use Company Improvements on [***].(c)FRESENIUS agrees (i) to promptly disclose all COMPANY Improvements; (ii) that all COMPANY Improvements will bethe sole and exclusive property of COMPANY; and (iii) that FRESENIUS will assign and does assign all COMPANYImprovements to COMPANY (or its designee) without additional compensation to FRESENIUS. FRESENIUS willtake such steps as COMPANY may reasonably request (at COMPANY’S expense) to vest in COMPANY (or itsdesignee) ownership of the COMPANY Improvements. COMPANY will have the exclusive right and option, but notthe obligation, to prepare, file, prosecute, maintain and defend at its sole expense, any patent applications or patentsthat claim and/or cover the COMPANY Improvements.(d)COMPANY agrees (i) to promptly disclose all FRESENIUS Improvements; (ii) that all FRESENIUS Improvements willbe the sole and exclusive property of FRESENIUS; and (c) that COMPANY will assign and does assign allFRESENIUS Improvements to FRESENIUS (or its designee) without additional compensation to COMPANY.COMPANY will take such steps as FRESENIUS may reasonably request (at FRESENIUS’ expense) to vest inFRESENIUS (or its designee) ownership of the FRESENIUS Improvements. FRESENIUS will have the exclusiveright and option, but17[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDnot the obligation, to prepare, file, prosecute, maintain and defend at its sole expense, any patent applications or patentsthat claim and/or cover the FRESENIUS Improvements21.Confidentiality.21.1The Receiving Party shall(a)keep in strict confidence and in safe custody all Confidential Information of the Disclosing Party,(b)use the Confidential Information only for the purpose of performing its obligations under this Agreement or the reasonableexercise of rights granted to it under this Agreement,(c)not copy or otherwise reproduce any of the Confidential Information except as is reasonably necessary for the purposeof performing its obligations or reasonably exercising rights granted to it under this Agreement, and(d)disclose the Confidential Information only to Entitled Persons.21.2“Entitled Persons” are only the statutory representatives, members of corporate bodies and employees, contractors,consultants and agents as well as the professional advisors of (a) the Receiving Party and (b) the Receiving Party'sAffiliates, in each case with a need to know and bound by written obligations of confidentiality and non-use no lessrestrictive than the terms of this Agreement. The Receiving Party shall (i) limit access to the Confidential Information to aminimum number of persons as necessary for the purpose of performing this Agreement (or exercise of rights grantedunder it) and (ii) advise all such persons of the confidentiality obligations at the time the Confidential Information is disclosedto them and (iii) procure that they comply with the terms of this Agreement as if they were a receiving party to it. TheReceiving Party shall be liable for any non-compliance of such persons with the terms of this Agreement as if the ReceivingParty was itself so non-compliant.21.3The Receiving Party's obligations under this Agreement shall not apply to Confidential Information which it can demonstrate,by admissible proof:(a)was known to the Receiving Party at the date of disclosure of the Confidential Information by the Disclosing Party,(b)is after the date of disclosure acquired by the Receiving Party in good faith from an independent third party who is notsubject to any obligation of confidentiality in respect of such information,(c)was at the time of its disclosure in the public knowledge or has become public knowledge during the term of thisAgreement other than through a breach of this Agreement by the Receiving Party, or(d)is independently developed by the Receiving Party without access to any of the Confidential Information.18[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED21.4If Confidential Information of the other Party is required to be disclosed by applicable law, judicial action of court ofcompetent jurisdiction, regulation, the rules or regulations of a recognized stock exchange or listing authority, governmentdepartment or agency or other regulatory authority, the Receiving Party will prior to any disclosure, promptly notify theDisclosing Party, and cooperate with it in its lawful measures of protection with regard to the Confidential Information prior tothe actual disclosure, and any disclosure by the Receiving Party will be only to the extent legally required to make suchdisclosure.21.5Upon the Disclosing Party's written request (which for Confidential Information not needed by the Receiving Party toperform its obligations or exercise its rights) may be made at any time and at the Disclosing Party's sole and exclusivediscretion, the Receiving Party shall, to the extent permissible under applicable law, promptly (i) return to the DisclosingParty any Confidential Information provided by or on behalf of the Disclosing Party to the Receiving Party in physical form,including, but not limited to, product samples, and otherwise (ii) destroy the Confidential Information. The Receiving Partyshall not be obliged to delete automatically generated computer back-up or archival copies of the Confidential Informationgenerated in the ordinary course of information system procedures, provided that except as expressly provided herein, theReceiving Party shall make no use of such copies and retain such copies under controlled locked files.21.6This Section 21 shall survive the effect of termination or expiry of this Agreement for [***] therefrom.22.Non-Exclusivity.22.1FRESENIUS undertakes to manufacture and supply the Product non-exclusively to COMPANY.23.Term and Termination.23.1This Agreement shall become effective as of the Effective Date and unless earlier terminated as permitted by thisAgreement, shall remain in full force and effect for a period of [***] from the later of the Effective Date or the completion of allServices under all accepted Purchase Orders issued prior to the [***] of the Effective Date (“Initial Term”). The term of thisAgreement shall automatically be extended for subsequent periods of [***] (“Extension Term”) unless terminated by aParty [***] prior to the end of the Initial Term or prior to the end of each Extension Term.23.2This Agreement, and any Product Schedule, may be terminated by a Party with written notice to the other Party under thefollowing conditions:(a)in the event of a material breach of this Agreement, or a Product Schedule, the non-breaching Party may terminate thisAgreement, or the applicable Product Schedule if after [***] written notice from the non-breaching Party specifying thebreach the other Party fails to cure such breach within the [***] period;(b)if otherwise explicitly stated in this Agreement;(c)if the other Party files a petition in bankruptcy or of insolvency, or is adjudicated insolvent, or takes advantage of theinsolvency law in any state or country, or makes an assignment19[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDfor the benefit of creditors, or a receiver, trustee or other court officer is applied for or appointed for its property (which, inthe case of any involuntary proceeding or assignments, are not dismissed within [***]);(d)by FRESENIUS if COMPANY undergoes a Change Of Control to a FRESENIUS Competitor (defined below). For thispurpose, COMPANY shall notify FRESENIUS without undue delay of such Change Of Control and the identity of thethen controlling FRESENIUS Competitor. In the event that FRESENIUS elects to exercise its right of terminationunder this Section 23.2(d), it must notify COMPANY within [***] of receipt of notice from COMPANY and unless ashorter period is agreed to with COMPANY, FRESENIUS will continue to supply COMPANY according to the termsof this Agreement and all its Attachments for [***] following the COMPANY’s receipt of notice of termination fromFRESENIUS. [***].23.3COMPANY will have the right, in its sole discretion, to terminate this Agreement or any Product Schedule upon writtennotice if (i) FRESENIUS fails to obtain or maintain any material governmental licenses or approvals required in connectionwith the Services and FRESENIUS fails to re-instate material governmental licenses or approvals within [***]; or (ii) theFDA or other Authority in the Territory does not approve Product (or any product containing or comprised of Product) formarketing or withdraws marketing approval upon [***] prior written notice to FRESENIUS. If COMPANY has agreed in apending Product Schedule to any minimum purchase quantity of Product, COMPANY shall remain responsible topurchase, prior to the effective date of such termination, [***].23.4Effect of Termination.FRESENIUS will, upon receipt of a termination notice from COMPANY or any other termination of this Agreement by eitherParty as well as expiration of the Agreement term, promptly cease performance of the applicable Services and will take allreasonable steps to mitigate the out-of-pocket expenses incurred in connection therewith. In particular, FRESENIUS willuse its best efforts to: immediately cancel, to the greatest extent possible, any third party obligations; promptly informCOMPANY of any irrevocable commitments made in connection with any pending Services prior to termination; promptlytry to return to the vendor for a refund all unused, unopened materials in FRESENIUS’ possession that are related to anypending Services; provided, that COMPANY will have the option, but not the obligation, to take possession of any suchmaterials; promptly inform COMPANY of the cost of any remaining unused, unreturnable materials ordered pursuant to anypending Services, and either deliver such materials to COMPANY (or its designee) or properly dispose of them, asinstructed by COMPANY at the expense of COMPANY; and perform only those services and activities mutually agreedupon by COMPANY and FRESENIUS as being necessary or advisable in connection with the close-out of any pendingServices.In case of COMPANY’s termination other than for cause, or FRESENIUS’ termination of the Agreement or this ProductSchedule for cause, COMPANY shall pay compensation concerning the Product as follows:(a)FRESENIUS’ Price, as specified in Part C.1 of the relevant Product Schedule, as valid at the time of termination for allwork in progress on non-ordered Product, including work on intermediates at the date of termination which are withinCOMPANY’s binding20[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDForecasts (Section 5 of the Agreement) or minimum purchase quantity (Section 5.3 of this Agreement); and(b)FRESENIUS’ direct costs for raw materials, intermediates and other materials in stock at the date of termination andpurchased for the use in the manufacture of the Product. The compensation under this sub-paragraph (b) is givenprovided that:(i) the raw materials, intermediates and other materials are to be used for Product volumes which arewithin COMPANY’s Forecasts and for a period not exceeding [***];(ii) the raw materials, intermediates and other materials cannot reasonably be used for other purposesby FRESENIUS; and(ii) COMPANY is entitled to collect such raw materials, intermediates and other materials for its own use or sale,without additional charge.23.5Neither termination nor expiry of this Agreement shall release either Party from fulfilling any obligations which may havebeen incurred prior to any such termination or expiry. Sections 1, 2.5 (last two sentences), 2.7, 5.3, 6.2 (last sentence only),7, 9, 10, 12, 13, 15.2 (last sentence) and 15.4, 16 through 21, 23.2(d), 23.4 through 23.7, 24 through 26 shall surviveexpiration or termination of this Agreement, as shall any other provision which due to its nature is intended to survive.23.6Every termination of this Agreement requires a written notice by registered mail or other permitted method as set forth inthis Agreement.23.7This Section 23 applies for the term and termination of any individual Product Schedule as well, as long as the term or thetermination is not regulated differently in the Product Schedule.24.Representations and Warranties.24.1FRESENIUS Representations and Warranties. FRESENIUS represents and warrants to COMPANY that:(a)it has the full power and right to enter into this Agreement and that there are no outstanding agreements, assignments,licenses, encumbrances or rights of any kind held by other parties, private or public, that are inconsistent with theprovisions of this Agreement;(b)the execution and delivery of this Agreement by FRESENIUS has been authorized by all requisite corporate or companyaction and this Agreement is and will remain a valid and binding obligation of FRESENIUS, enforceable in accordancewith its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors;(c)the Services will be performed with requisite care, skill and diligence, by individuals who are appropriately trained andqualified; and in accordance with Applicable Laws and industry standards, and Services under a Product Schedulewill be performed in accordance with all applicable provisions of this Agreement and the Quality Agreement,21[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDincluding the Specifications made known to FRESENIUS in writing prior to execution of such Product Schedule.(d)to the best of FRESENIUS’ knowledge, the use of the FRESENIUS Background Intellectual Property of FRESENIUS inthe conduct and the provision of the Services will not violate any patent, trade secret or other proprietary or intellectualproperty rights of any third party and it will promptly notify COMPANY in writing should it become aware of any claimsasserting such violation;(e)at the time of delivery to COMPANY, the Product Manufactured under this Agreement (i) will have been Manufactured inaccordance with GMP and all other Applicable Laws, the Manufacturing Process, the applicable Quality Agreement,and Specifications; (ii) will not be adulterated or misbranded under the FDCA or other Applicable Laws; and (iii) will nothave been produced in violation of any applicable provisions of the Austrian labor laws, as amended; and(f)FRESENIUS, its Affiliates, approved subcontractors, and each of their respective officers and directors, as applicable,and any person used by FRESENIUS, its Affiliates or approved subcontractors to perform Services under thisAgreement: (a) have not been debarred and are not subject to a pending debarment pursuant to section 306 of theUnited States Food, Drug and Cosmetic Act, 21 U.S.C. § 335a; (b) are not ineligible to participate in any federal and/orstate healthcare programs or federal procurement or non-procurement programs (as that term is defined in 42 U.S.C.1320a-7b(f)); (c) are not disqualified by any government or regulatory authorities from performing specific services,and are not subject to a pending disqualification proceeding; and (d) have not been convicted of a criminal offenserelated to the provision of healthcare items or services and are not subject to any such pending action. FRESENIUSwill notify COMPANY immediately if FRESENIUS, its Affiliates, or approved subcontractors, or any person used toperform Services under this Agreement, or any of their respective officers or directors, as applicable, is subject to theforegoing, or if any action, suit, claim, investigation, or proceeding relating to the foregoing is pending, or to the best ofFRESENIUS’ knowledge, is threatened.(g)FRESENIUS has adhered to, and shall continue to adhere to, the provisions of the U.S. Foreign Corrupt Practices Act of1977, as amended, codified at 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), and to any other applicable anti-corruption oranti-kickback legislation. Neither FRESENIUS nor any of its or its affiliates employees, directors, officers,subcontractors, consultants, agents, or representatives (collectively, “Representatives”) has engaged or in the futureshall engage in any activity that is prohibited by the FCPA, including bribery, kickbacks, payoffs, or other corruptbusiness practices. FRESENIUS further represents, warrants and covenants that it and its Representatives have notoffered, paid, or authorized, and will not offer, pay, or authorize, directly or indirectly, any payment of money oranything of value to a foreign official (as that term is defined by the FCPA) to improperly seek to influence any foreignofficial or Authority, or foreign government entity decision-making to gain a commercial or other advantage forCOMPANY.24.2COMPANY Representations and Warranties. COMPANY represents and warrants to FRESENIUS that:22[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED(a)it has the full power and right to enter into this Agreement and that there are no outstanding agreements, assignments,licenses, encumbrances or rights held by other parties, private or public, that are inconsistent with the provisions ofthis Agreement;(b)the execution and delivery of this Agreement by COMPANY has been authorized by all requisite corporate action and thisAgreement is and will remain a valid and binding obligation of COMPANY, enforceable in accordance with its terms,subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors;(c)to the best of COMPANY’s knowledge, the use of the COMPANY Background Intellectual Property in the conduct andthe provision of the Services will not violate any patent, trade secret or other proprietary or intellectual property rightsof any third party and it will promptly notify FRESENIUS in writing should it become aware of any claims assertingsuch violation(d)to the best of Company’s knowledge, Supplied Materials are, at the time of delivery, free from liens, defects, and inaccordance with authorization from all relevant Authorities and with all specifications agreed to by the Parties for theSupplied Materials.24.3Disclaimer of Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHEREXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULARPURPOSE, OR NON-INFRINGEMENT.25.Force Majeure.25.1Neither Party hereto shall be responsible or liable in any way for failure or delay in carrying out the terms of the Agreementresulting from any cause or circumstance beyond its reasonable control (a “Force Majeure”), including, but not limited to,fire, flood, other natural disasters, war, and civil commotion, provided that the Party so affected shall give prompt noticethereof to the other Party.25.2No failure or delay set out in this Section shall terminate this Agreement, and each Party shall complete its obligationshereunder as promptly as reasonably practicable following cessation of the cause or circumstance of such failure or delay,provided, however, that if any of the above force majeure events continue to exist for more than [***] after the date of anynotice given with regard thereto, either Party may terminate this Agreement with notice to the other.26.Miscellaneous. 26.1This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof andsupersedes all prior agreements and understandings of the Parties with respect thereto. For avoidance of doubt, nothing inthis Agreement changes the Development and Clinical Manufacturing Agreement dated [***], together with anyamendments thereto. This Agreement may be amended, including this section, only by an amendment in writing that issigned by an authorized representative of each Party. All Exhibits referred to in this Agreement are intended to be and arehereby specifically incorporated into and made a part of this Agreement. If there is any inconsistency between23[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDa Product Schedule or between any other Exhibit on the one hand and this Agreement on the other hand, the terms of thisAgreement shall govern.All Exhibits are listed as follows:Exhibit 1: Product Schedule(s).Exhibit 2: Form of Purchase Order26.2The general terms and conditions of either of the Parties shall not be applicable even if they are contained in or referred to inany Purchase Order, order confirmation or other correspondence.26.3If any provision of this Agreement is determined, by a court with proper jurisdiction, to be invalid, illegal or unenforceable, theremaining provisions of this Agreement, to the extent permitted by law, shall remain in full force and effect. The Parties shallagree on a valid, legal or enforceable provision in lieu of the invalid, illegal or unenforceable provision that reflects theParties’ intentions at the time of entering into this Agreement. The same shall apply if the Parties have, unintentionally, failedto address a certain matter in this Agreement.26.4No failure on the part of any Party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereofexcept with respect to an express written waiver relating to a particular matter for a particular period of time signed by anauthorized representative of the waiving Party, as applicable.26.5All notices hereunder shall be made in writing in the English language to the persons at the addresses set forth below, orsuch other person or address as may be designated by the respective Party to the other Party in the same manner. Allnotices must be given by (a) personal delivery, with receipt acknowledged; or (b) prepaid certified or registered mail, returnreceipt requested; or (c) prepaid recognized next business day or express delivery service. Notices will be effective uponreceipt or at a later date stated in the notice.For FRESENIUS:[***]For COMPANY:AMAG Pharmaceuticals, Inc.1100 Winter StreetWaltham, MA 02451U.S.A.Attn: Vice President of Technical OperationsWith a copy to:AMAG Pharmaceuticals, Inc.1100 Winter StreetWaltham, MA 02451U.S.A.Attn: General Counsel24[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED26.6Nothing in this Agreement is intended to create an agency relationship, partnership or joint venture between the Parties. Therelationship among the Parties is that of independent contractors. Neither COMPANY nor FRESENIUS shall present itselfas affiliated with the other Party and nothing herein shall be construed as to grant either Party the right to refer to the otheras a business partner or use the other’s trademarks and logos, unless specifically agreed upon in writing. This Agreementdoes not create an employer-employee relationship between COMPANY on the one hand and FRESENIUS or anyemployee, subcontractors, Affiliate of FRESENIUS, or any FRESENIUS personnel on the other.26.7Neither this Agreement nor any rights or obligations hereunder may be assigned or transferred by either Party, in whole orin part, without the prior written consent of the other Party, except that a Party may assign this Agreement and its rights andobligations hereunder without the consent of the other Party to: (a) an Affiliate of such Party or (b) subject to the provisionsin Section 23 regarding a Change of Control, any person or entity that acquires all or a substantial portion of the stock orassets, or line of business which the Product relates to, to such Party. Any purported assignment in violation of thepreceding sentence will be void. Any permitted assignee will assume the rights and obligations of its assignor under thisAgreement.26.8This Agreement shall be governed by and construed in accordance with the laws of Switzerland without regard to itsprinciples of conflicts of law. The United Nations Convention on Contracts for the International Sale of Goods (CISG) andthe 1974 Convention on the Limitation Period in the International Sale of Goods, as amended by that certain Protocol, doneat Vienna on April 11, 1980 are excluded and shall not apply to this Agreement, including for clarity, Product Schedules,Purchase Order, or deliveries based hereon or thereon.26.9Disputes.(a)The Parties will try to settle their differences amicably between themselves. Except for any disputes which are subject toSection 16.4, if any claim, dispute, or controversy of whatever nature arising out of or relating to this Agreement,including the performance or alleged non-performance of a Party of its obligations under this Agreement arisesbetween the Parties (each a “Dispute”), a Party will, before initiating any proceedings pursuant to subsection b) of thisSection, notify the other Party in writing of such Dispute. If the Parties are unable to resolve the Dispute within [***] ofreceipt of the written notice by the other Party, such dispute will be referred to an executive officer of COMPANY andan executive officer of FRESENIUS, or their designees, who will meet in person at least once and use their good faithefforts to resolve the Dispute within [***] after such referral.(b)[***].(c)[***].26.10Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may benecessary or appropriate in order to carry out the purposes and intent of this Agreement.26.11[***].25[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALLSUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED26.12Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define orlimit the provisions hereof. The Appendices to this Agreement are incorporated herein by reference and will be deemed apart of this Agreement.26.13Singular Terms. Except as otherwise expressly stated or unless the context otherwise requires, all references to thesingular will include the plural and vice-versa.26.14Additional Interpretations. Unless otherwise expressly provided herein or the context of this Agreement otherwise requires,the words "include", "includes" and "including" will be deemed to be followed by the phrase "but not limited to", "withoutlimitation", or words of similar import.26.15Counterparts. This Agreement may be executed in one or more counterparts, all of which shall constitute one and the sameagreement. The Agreement becomes valid only after the duly authorised representatives of both Parties have signed it.[Signature Page Follows]26IN WITNESS WHEREOF, the authorized representatives of the Parties have duly executed this Agreement as of theEffective Date.SIGNED for and on behalf of SIGNED for and on behalf of Fresenius Kabi Austria GmbH AMAG Pharmaceuticals, Inc. /s/ Heinz Riesner /s/ William K. Heiden Signature Signature Name: Heinz Riesner Name: William K. Heiden Title: General Manager Title: CEO SIGNED for and on behalf ofFresenius Kabi Austria GmbH /s/ Tanja GreveSignature Name: Tanja Greve Title: Executive Vice President/CFO/GMP SIGNED for and on behalf ofFresenius Kabi Austria GmbH /s/ Stefan CzvitkovichSignature Name: Stefan Czvitkovich Title: Director PP Sterile Pharmaceuticals Exhibit 21.1AMAG Pharmaceuticals, Inc. Subsidiaries of the registrant AMAG Pharmaceuticals Canada Corporation, a Nova Scotia unlimited liability company AMAG Europe Limited, a UK private limited company AMAG Securities Corporation, a Massachusetts corporation AMAG Pharma USA, Inc., a Delaware corporation FP1096, Inc., a Pennsylvania corporation Drugtech Sárl, a Swiss company Lumara Health Services Ltd., a Missouri corporationPerosphere Pharmaceuticals Inc., a Delaware corporation Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S‑3 (File No. 333-225604) and S‑8 (File Nos. 333‑148682,333‑159938, 333‑168786, 333-182821, 333‑190435, 333‑197873, 333-203924, 333-211277, 333-218911 and 333-226548) of AMAG Pharmaceuticals, Inc.of our report dated March 1, 2019 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in thisForm 10‑K./s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 1, 2019 Exhibit 31.1 CERTIFICATIONS I, William K. Heiden, certify that:1.I have reviewed this Annual Report on Form 10‑K of AMAG Pharmaceuticals, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and15d‑15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date:March 1, 2019 /s/ William K. Heiden William K. Heiden President and Chief Executive Officer(Principal Executive Officer)Exhibit 31.2CERTIFICATIONSI, Edward Myles, certify that:1.I have reviewed this Annual Report on Form 10‑K of AMAG Pharmaceuticals, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and15d‑15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date:March 1, 2019 /s/ Edward Myles Edward Myles Executive Vice President of Finance, Chief Financial Officer and Treasurer(Principal Financial Officer)Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of AMAG Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2018 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, William K. Heiden, President and Chief Executive Officer of theCompany, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ William K. Heiden William K. Heiden President and Chief Executive Officer (Principal Executive Officer) March 1, 2019 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of AMAG Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2018 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward Myles, Executive Vice President of Finance, Chief FinancialOfficer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the bestof my knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Edward Myles Edward Myles Executive Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial Officer) March 1, 2019 

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